BCE stock (TSX:BCE) is the best Canadian telco, investor says

Now that the dust has begun to settle on the blockbuster Rogers-Shaw merger, investors interested in the Canadian telecommunications space may have one fewer name to pick from, but at the top of their wish list should definitely be BCE (BCE Stock Quote, Charts, News, Analysts, Financials TSX:BCE). That’s according to portfolio manager Brian Madden, who just named it one of his Top Picks for the 12 months ahead.

“It’s the newest addition to our dividend growers portfolio, having switched out of Quebecor, which was sort of a dark horse that outperformed all the other telcos in the last year during our period of ownership. We like the fact that this is the largest telecom business in the country,” said Madden, CIO at First Avenue Investment Counsel, who spoke on BNN Bloomberg on Wednesday.

Two years in the making, the deal to combine Rogers Communications with Shaw Communications finally passed regulatory scrutiny at the end of March, with seemingly one of the main sticking points decided upon through the sale of Shaw’s wireless business to Quebecor’s Videotron.

Rogers’ share price has bumped higher upon the merger’s closing but so have its competitors in Telus Corp and BCE, which have both climbed a little over five per cent since the start of April. 

For BCE, the stock fell over much of 2022 and has been bouncing around the $60-$64 range for a number of months. But Madden thinks the fundamentals look good for BCE to head higher, particularly in relation to both Rogers and Quebecor, which will be focusing more on integration for the next while.

“We like the fact that it earns a structurally high return on shareholders equity of about 16 per cent and it’s a very consistent dividend grower with a five per cent compound growth rate in the dividend over the last decade,” he said.

“And also crucially, we think it’s operating from a position of financial strength relative to all the telco peers. It’s going to be more operationally focused relative to either Rogers or Quebecor, both of whom are digesting pretty transformational mergers and acquisitions,” Madden said. “And we’re starting to see the shares perk up.”

Ahead of BCE’s first quarter results due on May 4, BCE ended its 2022 with revenue for the year up 3.1 per cent to $24.174 billion and adjusted EBITDA also up 3.1 per cent to $10.199 billion. Adjusted EPS rose 5.0 per cent for the year to $3.35 per share.