BCE (BCE Stock Quote, Chart, News TSX:BCE) had a great 2019 but repeating that success will depend upon prevailing winds blowing its way in 2020. So says investor David Cockfield, who advises caution with the Canadian telco name.
After a poor showing in 2018, BCE really picked itself up off the mat in 2019, rising 11.5 per cent for the year all the while paying out a handsome dividend, which currently sits at a five-per-cent yield.
One of Canada’s top defensive stocks, BCE’s solid gains have been backed by favourable quarterly numbers as the telecom company has been able to keep adding to its wireless subscriber base and driving its top and bottom lines.
Ahead of BCE’s fourth quarter earnings due on Thursday, the company delivered its Q3 back at the end of October, where it earned a profit of $820 million or 91 cents per share on an adjusted basis, down from $861 million or 96 cents per share a year earlier.
Analysts had on average been expected a profit of 92 cents per share. BCE’s operating revenue came in at $5.98 billion compared to $5.88 billion a year earlier.
The company touted its subscriber wireless adds which hit 204,067 net new customers and featured 127,172 postpaid customers and 76,895 prepaid ones.
“With exceptional execution by the Bell team in Q3, we achieved industry-leading subscriber growth – including record Q3 net wireless customer additions – improved customer satisfaction and a strong financial performance,” said George Cope, former President and CEO in a press release. “This includes our 56th consecutive quarter of increased year-over-year adjusted EBITDA and continued strong growth in the free cash flow that fuels our network investment and shareholder value objectives.”
The stock had a rough final quarter to the year, however, losing six per cent over October through December. 2020 has been a little kinder, with BCE up 3.6 per cent for January.
But the dominant storyline in 2020 for BCE as well as for Rogers and Telus might be the rollout of 5G networks, a new standard for wireless communication which will take years to deploy and billions in infrastructure upgrades for companies like BCE which has been busy laying fibre-optic across the country.
Cockfield says that like the others, BCE’s path over the next few years will be impacted by the costs of bringing in 5G, costs which have yet to be clearly laid out and thus making investment in the space tricky.
“I’ve recommended [BCE] in the past but I’d be cautious,” said Cockfield of Northland Wealth, speaking to BNN Bloomberg last Friday. “It has done quite well.”
“I’m a little concerned about efforts on the part of the government to get fees down. There’s some substantial push there,” he said. “Also, I’m not so sure what the cost of the 5G is going to be. I think we’re talking billions and I’m wondering where that money is going to come from. I think it’s important for these companies on a long-term basis but on a short-term basis I’d like to see some forecasts as to just what 5G is going to cost BCE and all the telcos.”
“They’re all in a situation where I’d like to see some bottom-line information about what the cost is going to be,” Cockfield said.
Last month, BCE’s new CEO Mirko Bibic spoke in favour of allowing Chinese company Huawei Technologies operate in Canada in the construction of 5G networks, a scenario on which the federal government has yet to make a decision owing to concern over potential cybersecurity risks.