3 Reasons Why BCE Inc. Is the Best Way to Score Big Dividends

BCE Inc. (TSX:BCE)(NYSE:BCE) has exactly what dividend investors should be looking for.

| More on:
The Motley Fool

Over the past month, shares of BCE Inc. (TSX: BCE)(NYSE: BCE) have seemingly moved in only one direction: straight up. Since the middle of October, the shares have appreciated by over 8%.

As a result, BCE’s dividend yield has nudged down. After yielding more than 5% for most of the year, the stock now yields less than 4.8%. On Business News Network (which ironically is owned by BCE), Robert Spafford of Toron Asset Management said that the company is likely fully valued at this point.

But if you’re looking for big dividends, there is still no better place to turn. Below we take a look at three reasons why.

1. It’s a telecom

First of all, Canada’s big three telecommunications providers have everything that dividend investors should be looking for. They face little competition, are protected by high barriers to entry, and are able to generate consistent revenue. This allows the companies to pay very attractive dividends.

BCE provides a perfect example. From 2011 to 2013, its revenue totaled $19.5 billion, $20.0 billion, and then $20.4 billion. It is difficult to find that level of consistency in any other industry.

2. An improving revenue mix

A common concern among investors is BCE’s revenue mix, which is more heavily weighted toward the fixed wireline business (i.e., home phones). Even BCE acknowledges this is a declining business.

But over the past few years, the company has been growing in the right areas. And as a result, wireline accounted for only 18% of revenues last year – most of which came from corporate customers – compared to 31% back in 2008.

3. There’s a lack of alternatives

Finally, one only has to look at the big dividend alternatives to realize that BCE is clearly the best option.

On the TSX 60, six companies have bigger dividend yields than BCE. Five of them are oil producers. So these companies have to deal with lower oil prices, leading many to wonder if their dividends are sustainable. In fact two of them – Penn West Petroleum Ltd. and Enerplus Corp. – have cut their dividend in half in the last two years.

In fact, if you had held a portfolio of these six companies in the past three years, your portfolio would be down about 40% (the dividends would have softened the blow). While the companies may turn around, and their share prices could recover, this does show just how risky these names are. And is that really what you want as you collect your dividends?

So BCE may very well be the best dividend stock to buy. Obviously you should hold additional names, to achieve at least some diversification. The free report below reveals three dividend payers to help you with just that.

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.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Dividend Stocks

Businessmen teamwork brainstorming meeting.
Dividend Stocks

1 Magnificent Dividend Stock Down 15% to Buy and Hold Forever

Enbridge is off the 12-month lows but still trades at a large discount to its 2022 high.

Read more »

Increasing yield
Dividend Stocks

My Top 5 Ultra-High-Yield Dividend Stocks to Buy in May

If you’re looking to build a passive-income stream, these five dividend stocks should be on your radar.

Read more »

Payday ringed on a calendar
Dividend Stocks

A 10.6% Dividend Stock That Provides Monthly Cash Payments

A dividend stock with a mouth-watering yield providing monthly cash flow streams.

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in May 2024

These three REITs have envious growth potential and trade cheaply today, making them three of the top Canadian stocks to…

Read more »

Young woman sat at laptop by a window
Retirement

Why I Can’t Stop Buying Shares of This Magnificent High-Yield Stock in My Retirement Account

This utility is an excellent retirement stock, providing juicy income, income growth, and wealth creation for the long haul!

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Passive Income: How Much to Invest to Earn $1,000 Each Year

If you want the right passive-income producer, you want historical performance and future growth, and this dividend stock provides exactly…

Read more »

Cogs turning against each other
Dividend Stocks

1 Magnificent TSX Dividend Stock Down 9% to Buy and Hold Forever

A high-yield TSX dividend stock is a buying opportunity for long-term investors.

Read more »

money cash dividends
Dividend Stocks

2 Under-$10 Dividend Stocks I’d Buy Right Now

Here's why low-cost dividend stocks such as Decisive Dividend should be part of your shopping list in 2024.

Read more »