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BCE is a great defensive stock, this portfolio manager says

James Telfser
Investors worried about a looming recession can find a nice safe haven in telco BCE (BCE Stock Quote, Chart TSX:BCE), says James Telfser, partner and portfolio manager at Aventine Asset Management, who says the added expense of a 5G rollout won’t be a problem.

BCE reported its fourth quarter financials earlier this month, posting quarterly operating revenues of $6.215 billion, a three per cent year-over-year increase, and revenue for the year of $23.468 billion, better than 2017’s $22.757 billion. The company’s net income attributable to shareholders dropped to $606 million versus $656 million a year prior, but its EPS of 89 cents per share bested analysts’ predictions of 86 cents per share.

On the quarter, BCE president and CEO George Cope said the company’s growth has been on the broadband side, both for wireless and wire line.

“On the wire line side, basically the fibre-net investment that we’ve been making, if you look, we’ve been growing market share, we’re been growing revenue share,” Cope stated to BNN Bloomberg. “Go back historically and the telcos were behind the cable in terms of market share, so really our fibre investment, there’s no technology like it in the world and it’s a market share opportunity because of usage.”

Cope also calmed investors’ worries about tech company Huawei, whose status as a technology provider in Canada is currently in question due to potential ties to the Chinese government. Cope stated that while BCE used Huawei equipment for its 3G and 4G networks, the decision concerning its 5G vendor hasn’t been made yet.

“What we were saying to investors yesterday is that when the government concludes its review from a security perspective, we’ll know which direction the Canadian government wants to go and then we’ll focus our vendor selections on 5G,” he stated.

BCE also raised its dividend by five per cent in early February, giving investors added confidence that the company’s attractive yield isn’t going anywhere.

And that dividend is a major pull during times of economic uncertainty, says Telfser.

“It’s a great company. It’s one of the largest positions in our stable income fund and it’s got a great dividend yield. You hold on to a name like this for a long period of time. I don’t think you have to get too cute about quarters, just tuck it away,” says Telfser to BNN Bloomberg on Wednesday. “It will help you in a recessionary environment, for sure, which is why we hold it as a little defensive tilt.”

As far as the 5G rollout is concerned, Telfser says that companies the size of BCE should be able to take the added expenses in stride.

“It’s going to cost a lot of money to build this out but it’s a long-term opportunity for them,” he says. “You always have to look at how much capital the telecoms are outlaying but with a company like BCE, to be able to tap the capital markets on the debt side, the preferred side, it’s no problem.”

“They’ll get a pass almost every time on whatever they need to raise. Funding is not an issue, so I wouldn’t worry about that aspect,” 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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