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Take a pass on BCE, this portfolio manager says

William Chin

Canada’s top dividend stocks in the utilities sector are sliding, thanks to higher interest rates.

That means companies like BCE Inc. (BCE Stock Quote, Chart, News: TSX, NYSE:BCE) are looking less like the safe spot for your money than they used to be, says William Chin of Caldwell Investment, who suggests that if it’s security you’re after, maybe it’s time to think about government bonds.

With its diversity of businesses —from subscription services to media and sports teams— BCE might seen like the best option among Canada’s telcos, not to mention the largest, for investors to park their savings. BCE also pays a nice dividend, currently yielding 5.5 per cent, which keeps looking sweeter as the share price falls.

But Chin says it might be best to resist the lure of BCE’s dividend, as there seems to be less likelihood of the stock recovering any time soon, as the price chart points to more pressure on the stock to head lower. Already down ten per cent for the year — and down 14 per cent since a high back in July 2016 — BCE’s share price could keep falling as interest rates go up and bonds start looking more attractive, says Chin, Chief Technical Analyst and Portfolio Manager at Caldwell Investment.

“I think BCE is one of those defensive hiding places for investors and the train gets pretty crowded,” Chin told BNN Bloomberg. “And now, quite a bit of investors, about two years worth of investors, are underwater.”

“The yield may be attractive, but you could lose it in a week if the stock keeps going down. I would avoid it for the time being,” he says.

Among Canada’s big four telecom companies, Telus Corp (TSX:T) is down two per cent for 2018, Rogers Communication (TSX:RCI.B) is down three per cent and Shaw Communications (TSX:SJR.B) is down seven per cent.

“[Utilities were] a favourite hiding place and they all got too crowded, and investors are starting to bail out of them,” says Chin.

“Hiding places? Maybe even government bonds. Interest rates have gone up quite a bit. It’s hard to envision interest rates will keep going up forever, and at some point, it will hurt the economy and government bonds will do well,” he says.

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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