BCE is still a “widows and orphans” stock, this fund manager says

Canadian telecom company BCE (BCE Stock Quote, Chart TSX:BCE) may have some investors transfixed by its ever-increasing dividend but those searching for growth-oriented stocks should be looking elsewhere, says Gerard Ferguson of Jemekk Capital.

Ahead of BCE’s fourth quarter earnings report due tomorrow, shareholders will be looking for a repeat of its Q3 performance in November when the company posted consensus beats on revenue and EBITDA while recording 266,000 net subscriber additions across its wireless, internet and IPTV platforms. The company generated $5.88 billion in revenue, a 1.4 per cent year-over-year increase and better than the expected $5.8 billion, while posting a profit of 96 cents per share in adjusted earnings, moderately better than the expected 93 cent per share.

But while BCE has assets beyond its telecom business (most notably Bell Media) and has been able to pull off a few acquisitions such as MTS and AlarmForce, both in 2017, the long-term growth prospects are slimmer for the telcos, Ferguson argues, even though they’re still considered a safe place to park your money.

“We don’t own it,” said Ferguson, President and CEO of Jemekk Capital, to BNN Bloomberg Tuesday. “One of the concerns we’ve had with BCE has been growth and where they’re going to find it. It becomes a little bit of law of large numbers but it’s a legitimate concern for a company like this.”

“You’ve got the safety of a very strong dividend,” he says. “It was always considered a widows-and-orphans stock and I think it’s getting back towards that. It’s not something we’d consider owning because of the lack of growth but I don’t see any concerns with owning the stock.”

BCE’s share price slid for most of 2018 before rallying in October and finishing the year down 2.4 per cent. So far for 2019, the stock is up 6.5 per cent, while its dividend yield is 5.29 per cent.