BCE is a good stock for patient investors, Mike Newton says

BCE Inc’s (BCE Stock Quote, Chart TSX, NYSE:BCE) share price hit a low of $52.12 on Tuesday as it continues to lag behind its telecom stock peers.

But call it a buying opportunity, says Mike Newton of Scotia Wealth, who argues that the company’s infrastructure build-out and handsome dividend are reasons for shareholders to ride out the rough patches.

BCE had a good trading day on Wednesday as the stock rose 82 cents to $52.86, with midday trading on Thursday nudging the stock higher still. Overall, however, 2018 has been a year to forget for BCE shareholders, as the stock is now down 12 per cent and 15.6 per cent off its 12-month high set in mid-December.

A rising interest rate environment has made it tough on Canada’s telcos, as income investors have begun to head elsewhere (to bonds, for instance) in search of safe and reliable places for their money. Rogers and Telus have also posted poor numbers over the first half of 2018, but unlike Bell, they’ve recouped much of those losses by now.

“I think that this is just really competition for dollars and a lot of people are looking elsewhere with their money,” says Newton, portfolio manager and director of wealth management for Scotia Wealth, to BNN Bloomberg.

“There’s a little bit more of a growth environment out there and defensive utilities have been hurt. If you look at Telus, Rogers and Bell, Bell is doing worse but there’s quite a bit of correlation between them.”

BCE dividend attractive

But with a best-in-class dividend currently yielding over 5.6 per cent, Bell should make for a worthwhile buy, says Newton.

“I own BCE and I enjoy being a user of the product. We’re major users of all of their product lineup. The yield is really attractive,” he says. “I think that you need to be sneaking into this name.”

“I know that they’ve been really busy spending money on building out its [Internet-based TV service] Fibe, Home Hub and all of those initiatives. Certainly, in my neighbourhood, I’ve seen it and they’re doing it across the country,” he says.

Newton suggests that shareholders who can stick around through the hard times will likely reap the benefits when the stock turns around.

“We added more to Bell about a month ago just based on the yield, and I think that a patient investor will be rewarded here. I wouldn’t sweat it too much,” he says.