With the markets in continued turmoil and investors looking for defensive plays to secure their wealth, attention is turning toward sturdy sectors like the utilities. But how safe is that attractive dividend from a company like BCE (BCE Stock Quote, Chart, News TSX:BCE)?
Pretty safe, says Brian Acker of Acker Finley who argues things would have to get a lot worse before BCE pulls that ripcord.
Shares of BCE have been slumping along steadily since the start of April, a month which saw unprecedented gains almost across the board for equities. Almost.
Canada’s telcos were all relative losers in April, with BCE gaining 1.7 per cent, Telus (Telus Stock Quote, Chart, News TSX:T) gaining 2.2 per cent and Rogers (Rogers Stock Quote, Chart, News TSX:RCI.B) actually losing 0.7 per cent, with those numbers telling the tale of a full month’s focus on the less defensive names out there like Amazon and Microsoft in comparison to the more defensive corners of the market.
But the Canadian utilities have always moved in reaction to the market’s bullish or bearish sentiment along with the movement of key interest rates both in Canada and the United States, and their security during turbulent times was on display in the previous month of March, where the Big Three Canadian names all suffered losses which were far less traumatic than your average equity.
For March, BCE lost just 2.1 per cent for the month, while Telus lost 8.1 per cent and Rogers dropped a measly 4.5 per cent.
That type of security is made all the more attractive by healthy and safe dividends from all three names, with Rogers currently yielding 3.5 per cent, Telus at 5.1 per cent and BCE yielding a hefty 5.8 per cent.
And Acker says investors have little to worry about on the durability of, say, the dividend from BCE, a company which has increased its dividend per share for now 11 consecutive years.
“It’s regulated versus unregulated: all those companies [such as Canadian banks and telecom companies] are regulated, so that’s the good news,” said Acker, speaking to BNN Bloomberg on Friday.
“So, BCE can get their money from the Canadians and there’s institutions behind that.”
“Will the banks cut their dividend? They have a history of not doing that,” Acker said. “If COVID-19 basically lasts and we’re all out in the summer and in the fall, those dividends are safe. If this is a two year thing that just goes on and on, kind of a rolling thing, then nothing is safe, including the dividends of those companies.”
“So you have to watch them,” Acker said.
Last week, BCE reported its first quarter 2020 earnings, showing a profit of $680 million or $0.75 per share compared to $740 million or $0.82 per share a year earlier. Operating revenue was $5.68 billion, down a touch from $5.73 billion in Q1 2019.
Management withdrew its guidance for 2020 due to the COVID-19 crisis, although it did not foresee any changes to its planned capital expenditures for the year and said its dividend payouts would likely continue as planned.