Comments

  • Richard 

    As much as I like that lofty dividend, I worry that BCE is nearing the level of a cut in dividends. Wouldn’t a dividend cut send investors running to other investments if BCE’s share price doesn’t move up.

    • Scott 

      Thanks for your question.

      We still see BCE as a buy.

      Looking first at the dividend sustainability:

      There’s lots of media concern lately about its dividend sustainability. But they are using BCE’s own “free cash flow” figure—which includes capital spending (not just maintenance capital spending)—which in many ways is discretionary—in fact, it’s cutting back on the buildout of its fibre, 5G and 5G+ network infrastructure this year.

      While not guaranteed…the payout seems safe.

      In fact, the company has just raised its dividend (although the 3.1% increase is below the 5% or so raises in previous years.

      The company is cutting back on capital spending and making big job cuts—so that adds to its dividend sustainability.

      $$$$$$$

      BCE’s shares are trading at about the low they hit in March 2020.

      But notably, rival Telus has suffered a somewhat similar drop. BCE is down about 29% from its 2023 high and down 37% for its all-time high in 2022. Telus is down about 22% from its 2023 high and down 34% for its all-time high in 2022.

      This indicates that there is likely more to BCE’s (and Telus’s) drop than dividend coverage.

      Traditionally, Utilities and so on are said to suffer when interest rates rise—for example, they have a lot of debt, and higher rates make it more expensive to raise money and refinance existing debt.

      As well, their shares, which typically offer high yields, compete with fixed-income instruments for investor interest.

      All in all, while the stock is down, we think it will recover and move higher.

    • Scott 

      Thanks for your question.

      We still see BCE as a buy.

      Looking first at the dividend sustainability:

      There’s lots of media concern lately about its dividend sustainability. But they are using BCE’s own “free cash flow” figure—which includes capital spending (not just maintenance capital spending)—which in many ways is discretionary—in fact, it’s cutting back on the buildout of its fibre, 5G and 5G+ network infrastructure this year.

      While not guaranteed…the payout seems safe.

      In fact, the company has just raised its dividend (although the 3.1% increase is below the 5% or so raises in previous years.

      The company is cutting back on capital spending and making big job cuts—so that adds to its dividend sustainability.

      $$$$$$$

      BCE’s shares are trading at about the low they hit in March 2020.

      But notably, rival Telus has suffered a somewhat similar drop. BCE is down about 29% from its 2023 high and down 37% for its all-time high in 2022. Telus is down about 22% from its 2023 high and down 34% for its all-time high in 2022.

      This indicates that there is likely more to BCE’s (and Telus’s) drop than dividend coverage.

      Traditionally, Utilities and so on are said to suffer when interest rates rise—for example, they have a lot of debt, and higher rates make it more expensive to raise money and refinance existing debt.

      As well, their shares, which typically offer high yields, compete with fixed-income instruments for investor interest.

      All in all, while the stock is down, we think it will recover and move higher.

  • Richard 

    I suspect that you will never see a “Sell” recommendation on the equity because it is deemed a “blue chip” stock. An elevated dividend because of the drop in share price as a result of what BCE has done lately to cope with its rising costs. I still like the dividend tax credit as apposed to fixed income options.JMHO.

  • Not a good buy at this time. Shares are in a long term decline. The dividend benefit is erased by the decline.

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