Canadian telecom company BCE Inc. (Quote, Chart TSX, NYSE:BCE) has been a definite bummer of a stock this year, but how can you say no to that hefty dividend yield, now up over 5.5 per cent? For risk-averse investors it’s a no brainer, says Christine Poole of GlobeInvest Capital Management, who maintains that BCE’s track record shows it’s unlikely to be trimming its dividend anytime soon.
At close on Tuesday, BCE’s share price was up 0.7 per cent to $53.24, which nonetheless represents a drop of 11.6 per cent for the year and 15.3 per cent off its most recent high, set in early December of last year. That was when Canada’s big telcos all started falling as investors, responding to the higher interest rate environment, chose to vacate utilities.
But whereas both Rogers and Telus have handily won back their losses and then some, the same can’t be said for BCE (nor for Shaw Communications, for that matter).
BCE reported its second quarter earnings last month, featuring a consensus beat on wireless subscriber growth but producing a slim 1.7 year-over-year growth in revenue, coupled with profit for the quarter of $755 million, a 7.2 per cent year-over-year drop.
“We do hold it for some of our income-oriented investors and we do like the yield,” says Poole, CEO and managing director at GlobeInvest Capital, to BNN Bloomberg. “BCE along with some of the other telecom names have pulled back — once again, interest-sensitive — and I think for BCE, they have a record of increasing their dividends fairly regularly. They’re always managing to squeeze out more costs and grow their cash flow.”
“As we know, wireless is really the main growth area for all of these telecom companies and they continue to surprise by getting everyone to pay more per user,” she says. “I think you can buy it for the dividend, it’s safe. I think you can still count on increases within that four to six per cent level every year.”