The conventional wisdom would have it that buying utilities is perhaps not the best bet during a rising interest rate environment. Bonds and other investments look better the higher the rates go and capex-heavy companies like the Canadian telecoms are having to deal with higher interest on their loans.
True, but on the flip side a stock like BCE Inc (BCE Stock Quote, Charts, News, Analysts, Financials TSX:BCE) is a safe and stable place to park your money during the currently volatile period in the market. Safe and there’s that huge dividend dangling in front of investors at an attractive six per cent.
Combine those defensive qualities with the fact that the stock is well off its highs of earlier this year and you’ve got yourself a Top Pick for the 12 months ahead. So says portfolio manager Robert Gill of Goodreid Investment Counsel, who thinks investors will do well by owning BCE at these levels.
“BCE is a household name across Canada. It provides cable internet, wireless and wireline phone communications and they own some sports teams, as well,” said Gill, speaking on BNN Bloomberg on Wednesday where he nominated BCE as one of his three top picks.
“Shares have traded down not so much due to the fundamentals of the company itself, but more due to the fact that interest rates are simply rising. This is a widely-owned company across Canada, and even outside of Canada, and so shares will trade down as people are reducing their exposure to equities,” he said.
BCE’s share price took a while to get fired up over the pandemic, staying down around the $56 mark for a good year or so before heading north in early 2021 at a time when many stocks started tanking. The peak was hit at $73 in April of this year, after which BCE started sliding, making it almost all the way back to $56 before popping up more recently to around $63.
Operationally, things are going well for the telco, where its third quarter earnings were a surprise to the upside at $0.88 per share on revenue which climbed three per cent year-over-year to $6.024 billion. Management touted the company’s strong growth profile in both its wireless and wireline networks.
For Gill, the stability of owning a stock like BCE is a big selling point.
“It’s a great recurring revenue business and it’s a very stable, well-run company,” he said “It’s not very often you can buy a big, blue-chip company like BCE and buy it at a dividend yield close to six per cent. We like it here. You’re going to get some capital appreciation, as well, and you can sleep at night with this one and hold it for a long time.”