BCE Inc. (BCE-T)

Canadian telcos are an interesting space. He's been cutting his positions in them over several months, mainly because competitive intensity is remaining quite high. Dominant, but is the payout ratio sustainable? Will the price war abate?

He's cautious. Step away for now. A better time to buy would be when you no longer get those text offers of extra data for only $5 more.

Telecom's the only sector that's done worse than REITs this year. Headwinds of competition, interest rate sensitivity, dividend. Doesn't think dividend will be cut, lots of levers it can pull. If you own it for yield (and it's tax-efficient yield), you'll be OK. Yield is in 7.5-8% range.

Not a bad place to be as interest rates are decreasing. May not get a lot of dividend hikes over the next few years. If you want long-term capital appreciation, not an area he'd focus on. Sometimes it's worth it to sell, take the tax loss, and recycle the proceeds somewhere else to make money (into REITs, for example).

The board must be considering this with the payout ratio above 100%. But if BCE cuts the dividend at a modest 15-20%, there might be a positive move in the share price, perhaps not initially, because investors want this. Their subscriptions may be down, but the sell-off of shares is overdone. If BCE does cut, the knee-jerk reaction may be a sell-off, and that's when he might pick away at it.

Chart looks interesting. Early stages, but looks as though it's successfully retested support at $31.50 USD from April and early July. Getting towards the top of its $31-34 trading range. So far, so good. Long-term underperformer, near bottom of his Canadian RSI large-cap rankings. 

Technically quite encouraging if it was able to break out above $34.
(Note prices in USD.)

Downward slope since April 2022. Value score of 9/10 is attractive, but wait to see a turnaround. Telcos and utilities should start to do better once interest rates come down. Late 2024 or early 2025 may be promising. Dividend of ~8.8% safe. If you own it, she and the street say Hold.

Higher interest rates have hurt all the telcos. Dividend very attractive at 9%, looks secure for the time being, we'll see if it remains so. Pretty intense competition in the wireless space. Streaming is getting bigger. Regulatory risk. Pretty capital intensive.

If you hold, continue to collect the dividend, and keep an eye on technicals to see what an exit point might be, which might already have passed. Extremely oversold at this point.

The telcos have all fallen, BCE from $74 to $44. But it pays a nice dividend they just increased and has good upside potential. Hammered badly and now cheap. This could see a very nice pop. Is there's ever the time to roll the dice on BCE, now is it.

The worst Canadian telco. Revenue growth has slowed to 1.5%. So has dividend growth, though the free cash flow can sustain the near-9% dividend. There are layoffs now and coming.

Using BCE as an example, its growth has decelerated, volume growth consumes a large amount of capital, while pricing power is limited in the industry. But, Canada remains an oligopoly with little real competition, and largely, we do not believe its dividend is at any real risk in the medium term. One of the issues has been a combination of slowing growth, mixed with lower free cash flows relative to its dividend payments, resulting in increased borrowing at currently high rates. While a 5% interest rate may not seem objectively high, when considering the levels these companies were borrowing before, the rate of change is extremely high, and this is what impacts a company's bottom line. 

We would like to see BCE and other telcos tighten up on spending and begin to improve their margins to fully secure current dividend payments, but debt levels have been rising and this has led to some concerns by investors. We do not like the negative momentum of the name, but we believe a lot of worries have been priced into the name and we feel it can be slowly accumulated by income investors with a long-term timeframe. 
Unlock Premium - Try 5i Free

Often when you see a stock with an 8+% dividend yield, you think value trap. Paying out more in dividends than it's earning, still secure. Large restructuring. Thinks by 2025 will be covering dividend again. Even if the stock never goes up, you're getting an over 8% return, and that's pretty decent. Revenue stream is evolving; management has been aggressive in a tough environment and is dealing with it.

Cautions the "senior senior" to have a diversified portfolio. Don't plow all your money into any stock. 

Not as much leverage on the balance sheet as peers. Shares have contracted to a very attractive valuation, plus a 9% yield. He'd choose BCE at this point.

Telus usually trades at a premium to peers due to higher growth and further ahead in fibre to the home. Should benefit from immigration. Most diversified of the Big 3.

A contrarian theme, instead of chasing large US tech stocks. "Be greedy when others are fearful." Strong brand. A conservative investment. Long-life, high-quality assets. Great recurring revenue. Better balance sheet than some peers, fewer service outages, a more stable management team. Trades below market average at 14x PE. Yield is 9%.

Shares have traded down due to: interest-rate sensitivity and competition with higher bond returns, sector competition, regulatory challenges.

See his article in the Financial Post or on the goodreid.com blog.

He is seeing a bottom now at $44 and if it gets below that then sell. He doesn't see a lot of upside, maybe $48. It has issues such as interest rates and debt concerns.

Favours Telus for the long run. More consistent performer for dividend growth. Share price over 10 years has been steadier. (He's based in Western Canada, so he may have a bit of a home-team bias ;)

But if he had to buy one today, he'd go with BCE. Trading at a 10-year low, appears oversold. Yield is about 8.5%, and looks secure -- reducing capex, and it could introduce a discount to its DRIP program (which would give it a healthier payout ratio).

Holds it for client income, attractive yield over 8%. Going to wait it out. Thinks dividend safe. Not generating sufficient cashflow to pay for dividend, but company hasn't kept that a secret. Aware of shareholder base, adamant that dividend would be maintained. Eventually capex will go down, and will grow into payout ratio. Selling some assets. Rate cuts would be a tailwind.

Wireless competition has ramped up, but not cutthroat price wars. Immigration increases demand.