There are many advantages to owning dividend stocks and having a portfolio that constantly generates passive income. That’s why dividend investing is so popular. And while there are plenty of high-quality dividend stocks to buy, especially on the Canadian Dividend Aristocrats list, one of the very best is BCE (TSX:BCE), the massive telecom stock.
In order to find the best dividend stocks, there are several factors to consider. First, as always, you want to focus on identifying high-quality businesses that are healthy and have plenty of long-term growth potential.
This way, not only do they generate passive income for you, but they also have the potential to earn you significant capital gains in addition to constantly increasing the dividend payments they make.
It’s also essential to find dividend stocks that are reliable and resilient, particularly in economic downturns. Many dividend stocks are well-established businesses, so it’s ideal to find some of the safest companies that you can rely on as core portfolio stocks for years to come.
This is precisely why BCE stock is the perfect investment for constantly growing passive income.
BCE stock is a cash cow with resilient operations
One of the most important reasons why BCE is such an excellent dividend stock, and why it’s even able to increase the dividend each year consistently, is that the stock is highly reliable and is constantly generating billions in cash flow.
While BCE stock also has a media segment, the majority of its revenue, cash flow and earnings come from its wireline and wireless divisions.
Having access to communications has always been important. But as technology continues to improve and we continue to rely on the internet, even more each day, it’s an essential service for most consumers and commercial customers. Therefore, even in times of economic turmoil, while BCE is not immune to seeing some effects, the impact on its business should be minimal.
For example, during the pandemic, the largest impact BCE saw was a 9% reduction in sales, which lasted only one quarter. In fact, for the first four quarters of the pandemic, BCE saw just a 3.3% reduction in sales, showing what a resilient and defensive stock it can be.
Furthermore, throughout that stretch, BCE stock continued to generate billions in cash flow. And in the first full year of the pandemic, its annual operating cash flow actually increased from $7.9 billion to $8.3 billion, demonstrating what a cash cow BCE is.
BCE is a Dividend Aristocrat with 14 straight years of dividend increases
Considering just how resilient BCE’s operations are and the fact that the stock is consistently generating billions in cash flow from its operations, it should come as no surprise that it’s a stock on the Canadian Dividend Aristocrat list.
For 14 straight years now, BCE has increased the dividend. And what’s even more impressive is that in recent years, the stock has been spending billions on capital expenditures to expand its infrastructure and install 5G equipment as well as fibre-to-the-home infrastructure.
These investments are essential, as they help to keep BCE competitive and provide the company with years of growth potential while continuing to return a tonne of cash to investors.
In fact, in just the last five years, BCE stock has increased the dividend by 28%. Therefore, long-term dividend investors have seen a nearly 30% raise from the telecom giant in just the last half-decade.
And considering that BCE is trading off its highs today, and its dividend has risen from 5.7% last August to more than 6.4% today, not only is BCE stock one of the best you can buy for passive income, but right now is an ideal time to gain exposure.
