The Safest 5% Yield on the TSX

This is a dividend you can count on.

| More on:
The Motley Fool

Bell BCE 2In my years of investing, I have found that it’s not the risky junior mining firms or high-flying technology start-ups that make investors the most money.

Rather, the most successful companies are the ones that we see every day — businesses that operate not in quarters or years, but decades and centuries.

Case in point: BCE (TSX: BCE)(NYSE: BCE).

The company’s roots go back to 1880, when the Bell Telephone Company of Canada was incorporated by an act of Parliament. Bell was tasked with constructing telephone line alongside all public rights-of-way in Canada. On February 14, 1916, at a banquet in Montreal, a call was placed to Vancouver — the first trans-Canadian telephone call.

Today, under the name of Bell Canada Enterprises, the firm has come a long way from a mere telephone service provider. The company now delivers a wide range of products and services, including wireless communications, internet access, and satellite television. BCE’s business empire includes well-known names like Maple Leafs Sports and Entertainment, CTV, TSN, the Montreal Canadiens, and the Globe and Mail.

And here’s the thing: The company’s telecommunication network is virtually impossible to regulate.

Perhaps the most obvious foil is government regulation, which can limit or even bar new competition through licensing and permits. Canada’s big three telecoms — Rogers Communications (TSX: RCI.B)(NYSE: RCI), Telus (TSX: T)(NYSE: TU), and BCE –– have already locked down the best wireless spectrum. Without access to the airwaves, a new competitor could never emerge.

Strong brand awareness also creates a barrier because new competitors are forced to spend additional time and money to overcome existing customer loyalties. Similarly, the big three have cost advantages not available to potential competitors regardless of any new entrant’s size. The incumbents have access to the cheapest materials, lowest borrowing costs, and best retail locations.

Perhaps the biggest advantage BCE has is this: the sheer cost to reproduce its network. When Warren Buffett is considering an investment he asks himself this question: “Give me a billion dollars and how much can I hurt the guy?”

In the case of BCE, a billion dollars would do little to hurt the company. Its mobile broadband network, which covers 98% of Canada’s population, would cost tens of billions to recreate, and no amount of money could reproduce a loyal fan base like the Montreal Canadiens or the Toronto Maple Leafs.

Of course, the true test of a wonderful business is how well it fares during times of uncertainty. BCE managed to increase its dividend during the financial crisis in both 2008 and 2009. The company’s distribution has grown ninefold over the past decade.

Today, the stock yields an impressive 5%. While there are no sure things in investing, BCE is likely to continue delivering dividends to shareholders in good times and bad. That’s why this stock should be a core position in any income portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

money cash dividends
Dividend Stocks

TFSA: 3 of the Best Canadian Dividend Stocks to Buy This Year

Are you looking for some of the best Canadian Dividend stocks to buy this year? Here are three great options…

Read more »

Golden crown on a red velvet background
Energy Stocks

3 Canadian Dividend Aristocrats to Buy and Hold for Passive Income

Are you seeking safer options amid elevated market volatility? Consider these three Canadian dividend aristocrats to receive uninterrupted passive income…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

Suncor Energy Stock: Has it Bottomed Out?

Suncor Energy Inc (TSX:SU) stock has been falling lately. Has it bottomed out yet?

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Stocks for Beginners

2 Top Stocks to Buy in February 2023

Here are two of the best Canadian stocks you can buy in February 2023.

Read more »

Aircraft wing plane

Bombardier Stock: Should You Invest in the Current Bullish Trend?

Capturing a bullish trend from beginning to end is an exception, not the rule. In most cases, you will only…

Read more »

A worker uses a double monitor computer screen in an office.

1 Top TSX Stock to Buy as Tech Makes a Rebound

Shopify (TSX:SHOP) stock is a great e-commerce gem to buy and hold for the long run, as shares look to…

Read more »

A worker wears a hard hat outside a mining operation.
Metals and Mining Stocks

Cameco Stock Is Approaching its 52-Week High: Time to Invest?

Cameco (TSX:CCO) stock is nearing 52-week highs once more after falling from September last year, but should you wait for…

Read more »

edit Person using calculator next to charts and graphs

For a Carefree Retirement, 3 Careful Stock Ideas

The right stocks can help you build a retirement nest egg that ensures a financially stable and carefree retirement.

Read more »