Thanks to the recovery momentum, 2021 has been great for the stock market in general. The TSX has grown over 17% year to date, and the momentum is not slowing down, even though energy, one of the heavyweight sectors, has already run out of recovery momentum.
From a capital appreciation perspective, the recovery is great. But not from a dividend perspective. The more dividend stocks grow, the smaller the yield will be, and that’s true even for Dividend Aristocrats. That’s because they are unlikely to grow their payouts before 2022, and until then, the yield will continue its inverse relationship with the rising valuation.
So, if you are looking for a generous Dividend Aristocrat, there is one you might consider adding to your portfolio before 2021 is over.
The telecom giant
BCE (TSX:BCE)(NYSE:BCE) is the telecom stock. As the banking sector of the country, the telecom sector is also highly consolidated, and three major players control most of the market. Still, BCE is by far the largest player, at least as far as the market capitalization is concerned. At $58.8 billion, its market cap is over $19 billion higher than Telus, the next largest telecom company in the country and almost double that of Rogers.
As one of the largest companies in the telecom sphere, BCE’s other numbers are just as impressive. By the end of 2020, the company had 10.2 million wireless subscribers, 3.7 million high-speed internet users, and 2.74 million TV subscribers. The company is still catering to about 2.4 million residential telephone customers (wired), but the number is steadily declining.
With such an impressive footprint and its position in the blooming 5G market in Canada, the company might see its business growth in the near future. 5G’s application in IoT is already transitioning from concept boards to reality, and BCE itself is partnering off with businesses in this arena. The latest example is its collaboration with Toronto-based start-up Tiny Mile, which operates a fleet of small delivery robots.
BCE is a Dividend Aristocrat that’s been growing its payouts for 12 consecutive years and has sustained its dividends through financially harsh times, most recently during 2020. The losses the company booked in 2020 (especially in the first half) pushed the payout ratio quite high, and even though it’s still in the dangerous territory, that is, above 100%, the telecom giant is unlikely to cut its payouts in the near future.
The most attractive aspect of BCE stock is its juicy 5.3% yield. While it was even higher a few months ago, it’s still an impressive yield. And the sooner you lock it in, the better. The stock is on the road to recovery, and even though it hasn’t grown too much in 2021 (about 18%), the growth is quite consistent, and the momentum is unlikely to wane anytime soon.
This telecom, 5G stock has only just grown past its pre-pandemic valuation, and it’s only mildly overpriced. If the next quarter’s earnings meet or surpass expert expectations, the stock’s upward momentum might pick up the pace. This will offer you some capital appreciation which is not exactly a forte of BCE stock.
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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV and TELUS CORPORATION.