With a Nearly 7% Yield, Is It Time to Buy BCE Stock?

BCE (TSX:BCE) stock is getting absurdly cheap as shares sag to multi-year lows.

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Shares of telecom titan and dividend juggernaut BCE (TSX:BCE) have been under quite a bit of pressure for well over a year now.

At writing, they are off just shy of 24% from their peak hit back in April 2022. Undoubtedly, higher interest rates, macro headwinds, and telecom-specific woes have weighed heavily on the share price. It also doesn’t help that BCE has exposure to the ailing media scene. Media can act as a real drag on growth from the telecom business, especially as macro headwinds mount.

BCE faces pressure on the media side

Indeed, the tough macro is partially to blame for the media segment’s woes. However, I think the rise of streaming will continue to weigh heavily on the business well after a potential recession ends. Media is a tough place to be right now.

BCE’s CEO, Mirko Bibic, recently called for a bit of help from the federal government to help ease the media sector’s pains. Even if the government lent a helping hand, I’m not so sure a sizeable turnaround can be sustained. In any case, I don’t think the CRTC will be providing any sort of financial assistance, even if the woes worsen over the coming months and quarters.

For now, BCE is doing its best to cut costs where possible. The company is fresh off a major wave of layoffs, with around 1,300 employees losing their jobs. Though such news is not ideal, such cuts will grant BCE a bit more financial flexibility.

As it stands, BCE’s dividend is safe and sound, even as the yield creeps closer to that mouth-watering 7% mark. At writing, shares of BCE sport a 6.88% yield, close to the highest it has been in recent memory.

Should investors buy BCE stock for the swollen dividend yield or wait for a bigger pullback?

Indeed, BCE stock seems to be up against it. Shares are in a bear market and could easily retreat to depths not seen since the dark days of 2020. There’s no easy fix for the media segment. However, I do think a re-acceleration in wireless subscriber growth could help spark some sort of relief rally over the near to medium term.

The company’s second quarter was not bad at all! New postpaid phone subscribers came in at an impressive 111,000. Though the wireless scene could see a pick-up in competition, I am encouraged by the recent subscriber growth and think the strength could help BCE offset woes in the media segment.

Over the next 18 months, I’d look for margins to improve as BCE does its best to trim expenses while continuing to invest wisely in areas that could jolt long-term growth. Indeed, I expect management to spend less on media and more on wireless infrastructure over the next three to five years.

The Foolish bottom line on BCE stock and its juicy dividend

Sure, there may be a bit of baggage weighing down BCE stock. However, I think the current valuation (19.9 times trailing price-to-earnings) more than makes up for the potential headwinds.

The near-7% dividend yield is worth grabbing right here. It’s safe and could be subject to further growth as BCE does its best to turn the tides. If you seek a fat dividend yield and deep value, I think it’s tough to look past the name despite the less-than-ideal environment.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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