BCE Stock: Telecom Giant With 7% Dividend Yield Has Big Potential
February 12, 2024
BCE Inc Could Be Set to Provide Robust Returns to Shareholders
Investors haven’t really loved telecommunication stocks over the past year and a half, and their reasoning for ditching these stocks is somewhat valid.
Telecom companies tend to have big debt loads. So, as interest rates have gone up, the companies’ high debt loads could hurt their profitability. Plus, inflation has hit the pocketbooks of average consumers, which means telecom service providers could see a decline in their business.
However, it doesn’t mean investors should ignore telecom stocks completely. In fact, with their share prices down, now is a wonderful time to look at some of the better telecom stocks.
For income investors, one telecom stock worth looking at is BCE Inc (NYSE:BCE).
Based in Montreal, Quebec, Canada, BCE offers wireless, wireline, Internet, and TV services to residential, business, and wholesale customers in Canada. More commonly known as Bell Canada or just Bell, the company operates through three business segments: Bell Wireless, Bell Wireline, and Bell Media. (Source: “BCE Inc. (BCE),” Yahoo! Finance, last accessed January 30, 2024.)
The Bell Wireless segment provides integrated digital wireless voice and data communication products and services, as well as consumer electronics products.
The Bell Wireline segment provides data, Internet access, Internet Protocol TV (IPTV), local and long-distance phone services, satellite TV services, and connectivity services. It also buys and sells local and long-distance phone services, data, and other services from and to resellers and other carriers.
The Bell Media segment provides conventional TV, specialty TV, pay TV, streaming services, digital media services, radio broadcasting services, and out-of-home advertising services.
Wall Street Analysts Turning Bullish on BCE Stock
Now, what’s so good about BCE stock?
As noted earlier, telecom stocks have been given the cold shoulder for some time, but the tide could be turning.
We’ve started to see Wall Street analysts get optimistic about BCE Inc. This is worth watching because analysts tend to influence institutional investors, and once institutional investors start buying a stock, those who already own the stock could benefit.
In early 2023, TD Securities downgraded its rating for BCE stock from “Buy” to “Hold.” In September 2023, it downgraded the stock once again. Going back a little further, there were several more rating downgrades from other Wall Street analysts.
All the downgrades and pessimistic sentiment didn’t bode well for BCE Inc’s share price. In early 2022, BCE stock traded as high as $53.11. As of this writing, it trades 23% below that high.
Chart courtesy of StockCharts.com
What’s been happening with the ratings for BCE stock this year?
On the second trading day of 2024 (January 3), TD Securities upgraded its rating for BCE from “Hold” to “Buy.” (Source: “BCE Inc,” Finviz, last accessed January 30, 2024.)
At the time of this writing, BCE had six “Buy” ratings from Wall Street analysts, the highest number of such ratings for the stock in several months. (Source: Yahoo! Finance, op. cit.)
If analysts induce buying from investors with large amounts of purchasing power, it could mean much higher BCE stock prices.
Solid Dividends So Far & They Could Get Better
Beyond this, BCE shareholders get treated well in terms of dividends. With the exception of two quarters in 2008 (during the Great Recession), BCE stock has paid dividends without interruption since the second quarter of 1983.
Its dividend history actually goes back a lot further, though. BCE Inc was founded through a corporate reorganization in 1983, but Bell Canada had already been around since 1880, and it had paid dividends for decades.
In January, BCE stock paid quarterly dividends of $0.9675 per share. (Source: “Dividend History,” BCE Inc, last accessed January 30, 2024.)
As of this writing, that translates to a dividend yield of 7.01%.
BCE also has a history of increasing its dividends. As its business improves, its distributions could increase again.
The Lowdown on BCE Inc
BCE, like other telecom companies, has faced scrutiny since early 2022. That, however, doesn’t mean it should be ignored. To patient investors, BCE stock offers a great opportunity for capital appreciation and income growth.
BCE Inc is one the biggest telecom companies in Canada; it has an enormous market share in the country.
Moreover, the company has a very long history of generating value for its shareholders, and it could continue to do so.
