Is BCE stock still a Buy?

Telecom stocks have been volatile lately and that includes Canadian favourite BCE Inc (BCE Stock Quote, Charts, News, Analysts, Financials TSX:BCE), which has lost about nine per cent in the month of June alone, which is a lot for a low-beta, defensive name like BCE. It may be tough to keep your eyes off the daily charts and look long-term at your money, but that’s what a dividend-paying stalwart like this one is all about. 

According to portfolio manager Lorne Steinberg, income-seeking investors will do alright by BCE as long as their focus stays squarely on the high-yield dividend, which currently sits at about 5.9 per cent. 

“BCE is an income generating option that we own in our Canadian Dividend Growth Fund,” said Steinberg, president of Lorne Steinberg Wealth Management, who spoke on a BNN Bloomberg segment on Tuesday.

“BCE has a very healthy dividend. It’s had minimal revenue growth over the last few years but it’s a very efficiently run business,” he said. “They may get a bit of a bump from 5G and various other things that are happening in the sector, but it’s a phenomenal dividend play with phenomenal yields so as an income producer it’s great.”

With a current market cap of $57 million, BCE has nosedived over the past few weeks, losing 15 per cent since hitting a high of $73.76 on April 20 — and all things are relative, of course, as this market has seen its share of real tanks — with BCE now giving back a good chunk of the gains made over the past year. 

The stock was a late-bloomer COVID-wise, as it wasn’t until sometime mid-last year when it finally pulled out of a prolonged slump. Where other sectors of the market were making hay on all that government stimulus money in 2020 and early 2021, BCE and the rest of the Canadian telcos were perhaps not top of mind for the retail investment crowd who focused on flashier toys in the tech space and cryptocurrencies.

Both of those have been lambasted this year and stocks like BCE became more in vogue for all their low-risk, high-yield sturdiness. Until more recently, however, where the market seems to have pulled back on utilities in general. In BCE’s case, the stock had an ex-dividend date of June 15, which may or may not have added to the recent volatility.

BCE’s business look to be in good shape, with the company coming off a quarterly beat last month with its first quarter 2022 financials. BCE hit $5.859 billion in operating revenues, up 2.5 per cent year-over-year, and adjusted EBITDA up an even better 6.4 per cent to $2.584 billion. Adjusted earnings per share were up 14 per cent to $0.89, which was a stitch higher than analysts had called for at $0.80 per share.

BCE said its Bell Media revenue was up 15.7 per cent to $825 million due to better advertising and subscriber revenue and stronger TV performance. Bell Wireless revenue was also up 5.2 per cent to $2.210 billion, with service revenue figuring strongly in the uptick at an 8.7 per cent increase to $1.646 billion compared to product revenue which was down 3.8 per cent to $564 million. The main topline loss was in Bell Wireline, which dropped by 2.2 per cent to $3.013 billion for the quarter.

Saying that the Q1 represented the first quarter where BCE’s consolidated financial results surpassed pre-COVID levels, President and CEO Mirko Bibic praised his companies operational excellence in the quarterly press release, saying,

“Bell’s solid performance across all segments shows that we have the right strategy in place, we’re consistently executing on that strategy and our products and services are resonating with our customers. In particular, I’m proud of the gains we made to continue championing the customer experience with a 36% decrease in complaints per the CCTS mid-year report,” Bibic wrote.