This Top 5G Play Still Looks Attractive Today

Here’s why Canadian investors would be remiss to ignore the growth potential BCE (TSX:BCE)(NYSE:BCE) provides right now.

| More on:
5G chip

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The 5G space is flaming hot right now, and leading 5G players are fighting neck and neck to take market share.

In this environment, BCE (TSX:BCE)(NYSE:BCE) is garnering a lot of attention these days. The company’s leverage to the 5G growth catalyst is notable. Additionally, this telecom player has been one of the most stable growers on the TSX over the long term.

Thus, it’s no surprise investors are jumping on BCE stock of late. Here’s why I think there may be more upside with this stock on the horizon.

Excellent earnings buoying this 5G play

In the telecom space, fundamentals are really what matters. The stereotypical telecom investor is someone looking for consistent, reliable long-term returns. Investors can expect roughly half of the returns telecoms provide to come in the form of dividends. For Canadian retirees, taking a 6% yield with a dividend tax credit sounds nice.

However, investors will want to ensure BCE’s cash flow growth will be sufficient to support this dividend now and over the long term. Some dividend appreciation would also be nice.

In this light, BCE appears to be a relatively safe high-yield pick today. The company recently beat estimated earnings, reporting $0.78 per share versus consensus estimates of $0.73. The company’s revenue grew to $5.7 billion, also beating estimates. What’s not to like?

Well, revenue is growing at a relatively slow clip, up marginally year over year. Regulations tied to pricing appear to be officially in play for Canadian telecoms. Years of price increases may be capped if regulators step in further as they’ve said they would to protect the Canadian consumer.

That said, the company’s cash flows remain extremely stable. Given the valued-added growth potential 5G will provide, telecoms are an even safer place to be today than prior to the pandemic.

Underlying 5G catalysts provide wind to BCE’s sails

Slower growth is certainly something every investor will want to factor into their models with telecoms like BCE. However, over the medium to long term, perhaps BCE can eke out a few more percentage points of growth each year.

The rise in 5G-enabled devices has meant telecoms have been forced to upgrade their systems. Doing so is costly. However, the long-term benefits of doing so simply make sense.

Market share is everything for Canada’s telecoms. Providing the most robust 5G network is what each competitor is after. And in this regard, Bell and BCE is a top player in Canada.

If BCE can chip away at the market share of its peers, investors could see improved top- and bottom-line performance over the medium term — that is, with or without price increases.

Bottom line

BCE’s rock-solid dividend yield near 6% and its cash flow stability make this a long-term investor’s dream stock. Indeed, those seeking reliable long-term returns can’t go wrong owning this name.

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 Chris MacDonald has no position in any of the stocks mentioned.

More on Dividend Stocks

Dividend Stocks

Market Correction: 2 Cheap TSX Dividend Stocks to Buy Now for a Self-Directed RRSP

These top TSX dividend stocks look cheap right now for a self-directed RRSP focused on total returns.

Read more »

Target. Stand out from the crowd
Dividend Stocks

3 Dividend Stocks That Might Keep Pace With 7.7% Inflation

Three high-yield dividend stocks that might help investors keep pace with Canada’s 40-year-high inflation.

Read more »

value for money
Dividend Stocks

2 Canadian Stocks Trading at Unheard of Prices

Dirt-cheap stocks are a dime a dozen, but a few of them offer you a valuable opportunity, as they trade…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

Is Suncor Stock a Buy Right Now?

Suncor has delivered outsized gains to investors in 2022 and might continue to do so for the rest of the…

Read more »

Canadian stocks are rising
Dividend Stocks

3 Ways to Invest in Canadian Real Estate Under $20

Real estate can be a great way to make passive income, but you certainly don't have to invest a lot…

Read more »

grow dividends
Dividend Stocks

TFSA Wealth: 2 Oversold Canadian Stocks for a Retirement Fund

These top TSX divided stocks look attractive today for TFSA investors.

Read more »

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

Create $1,487 in Passive Income From a Top TSX Dividend and Growth Stock

This top growth stock on the TSX today could bring in almost $1,500 in passive income and triple your investment…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Renters Will Rise in Number vs. Homebuyers in 2022

The greater majority of Canadian renters doubts their ability to purchase a home in 2022 due to surging inflation and…

Read more »