Canada’s telecoms are often regarded as some of the best defensive stocks to own, and there’s a good reason for that view. But which Canadian top telecom investment is right for your portfolio?
Here’s a look at BCE (TSX:BCE) to determine if it’s still the top telecom investment at this juncture.
Meet BCE
The first thing that investors should note is that BCE is huge. Not only is BCE one of the largest telecoms in the country with nationwide coverage for its core subscriber services, but the telecom also boasts a massive media segment.
That media segment provides an alternative revenue stream for the company, which is helpful for both growth initiatives and maintaining its dividend.
That’s not to say that BCE’s other segments aren’t seeing solid growth. In the time since the pandemic started, the defensive appeal of BCE has grown immensely. This is because a large segment of the population continues to work and study in a full or partially remote capacity.
In other words, the requirement for an internet and wireless data connection has become one of necessity to many. And the sheer necessity of those segments has helped to bolster BCE’s subscriber numbers during earnings season.
Let’s talk about those results
BCE reported results for the most recent quarter last month. In that quarter, the telecom saw consolidated revenue rise 3.5%, while earnings and free cash flow declined. Specifically, net earnings were down 15.6% over the prior period to $788 million while free cash flow declined to $85 million.
As with most segments of the economy, increased expenses stemming from higher interest rates were primarily attributed to the drop in earnings. Still, BCE did post strong growth in several key areas.
In the wireless segment, BCE saw postpaid net subscriber activations surge 26.5% in the quarter to 43,289 over the prior year. Mobile-connected devices witnessed a similarly impressive bump in the quarter, increasing 44.7% over the prior quarter.
In other words, BCE is a long-term game. While earnings took a (largely expected) dip, subscriptions and revenue continued an upward trajectory.
What about that dividend?
One of the main reasons why investors continue to flock to BCE is the company’s juicy quarterly dividend. As of the time of writing, BCE’s dividend works out to an impressive 6.31%, making it one of the better-paying options on the market.
To put that yield into perspective, let’s consider a $30,000 investment. For that initial investment, investors can look to generate a first-year income of approximately $1,900. That fact alone makes BCE a top telecom investment for many investors.
And that’s not even the best part.
BCE has been paying out dividends for over a century without fail. The company has also maintained annual or better bumps to that dividend for well over a decade. And investors not yet ready to draw on that income can reinvest those dividends, allowing that eventual income to rise further.
BCE is the top telecom investment for your portfolio
No investment is without risk, and that includes the very defensive-oriented BCE. Market volatility over the past year has pushed the stock into discount territory, making it appealing for longer-term value-minded investors.
And that’s the key point – long-term. The volatility we’ve seen over the past year isn’t going to dissipate over the next month or even three. But over the longer term, BCE will remain a great top telecom investment that, in my opinion, investors should buy now and hold for decades.
