Depending on where you are in your investing life, different companies can provide different things for you. If you’re an early investor, you may want to think about some decent growth stocks. When you’re a little older, it’s important to think about maximizing your income.
BCE Inc. (TSX:BCE)(NYSE:BCE) is probably one of the best—if not the best—stocks to own if you’re looking for dividends. If you’re hungry for income, whether it’s so you can reinvest it in other stocks or because you live on it, you’ll want to own BCE. Some have even said this is the top stock for dividends.
The primary reason is because it pays out the majority of its income to shareholders. It has a giant business and now it is just printing money.
If I wanted to launch a telecommunications company, it would require billions of dollars just for infrastructure. Then I would have to convince people that I am the right company to work with. By the way, I have no reputation. This quest to launch my own competing telecommunications company would likely fail.
And that’s why BCE is in such a great place. Its moat is so wide because of the high barriers to entry that it is able to give so much of its money back to investors. And because it is built on a recurring revenue basis, investors know how much money will be hitting BCE banks every month.
Because of all this, BCE is able to pay an incredible lucrative 4.9% yield to its investors. That is $0.65 every quarter for every share that you own of the company. That is a really significant amount of money for those hungry for income. By reinvesting that money, you could really grow a nice dividend-paying portfolio.
But there is a concern …
BCE is expensive. Investors know that it will pay out so much in dividends, so they buy it up because they are hungry for that money. Unfortunately, there isn’t that much growth that BCE can achieve. It dominates the market, it has a couple of competitors, but because of many reasons, it cannot expand.
Therefore, if you buy BCE, you need to understand that you’re not likely going to see much growth in the stock. This is definitely not a growth play. If you buy BCE, you are buying it because of its income potential, which is perfectly fine.
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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 Jacob Donnelly has no position in any stocks mentioned.