It’s been a long way down for a utility stock like BCE (BCE Stock Quote, Chart, News TSX:BCE) over the past couple of weeks, but the company has a lot going for it, according to portfolio manager Bryden Teich, who says the stock looks attractive here.
BCE had a bang-up year in 2019, finishing up 11.6 per cent, a nice return for a defensive stock paying a healthy dividend, and while 2020 started out excellently, with BCE rising 8.3 per cent over the first month and a half, the stock is back to even for the year.
Much of that downturn came in the disaster that was last week in the markets, which hit all sectors hard including the utilities, more typically thought of as safe havens during market volatility. BCE finished last Friday down 8.6 per cent for the week, while competitors Rogers Communications and Telus ended the
week down 6.6 per cent and 5.4 per cent, respectively.
Teich said at these levels, investors should be stocking up on BCE.
“BCE is a company that we we own shares in and we've owned for a long time,” said Teich, partner at Avenue Investment Management, speaking with BNN Bloomberg last Friday. “I think we really like what they've done on the rollout of their Fibe, and what their plan is for 5G, and I think the business itself isn't expensive and with interest rates being low, the dividend being very stable, this is really a great business to be owning.”
Teich said interest rates are key indicators for stocks like BCE, a potentially good sign as the current environment does not seem to be one of rising rates. The coronavirus outbreak has put a dent in economies worldwide and central bankers in states worldwide are now lowering their already low rates in effort to spur their respective economies. Both the US Federal Reserve and Canada’s central bank are expected to announced rate cuts in the near future.
“I think the the risk for, whether it's a BCE or a Fortis or any of these other higher yielding stocks, the much bigger risk for these is a higher interest rate environment. And I don't think we're going to get that,” Teich added.
“So, if you don't have shares of BCE or you don't own good yielders like that I think these opportunities are great to be be adding to them. And so we would be, you know, adding at this level, and I think it's a good stock to be owning long term,” he said.
BCE last reported its earnings in early February where its fourth quarter 2019 featured operating revenue up just 1.6 per cent year-over-year to $6.32 billion and adjusted earnings of $0.88 per share, down from $0.89 per share a year earlier. Analysts had been expecting $0.89 per share. The company added 123,582 subscribers to its wireless segment for the quarter,
BCE announced last month that it will have 5G service up and running in major urban centres in Canada later this year.