The Canadian stock market has no shortage of blue-chip stocks. These high-quality stocks have top-notch underlying companies that are known for delivering solid long-term returns through capital gains and dividends to shareholders.
While the Big Six Canadian banks are the go-to blue-chip stocks that are staples in many investment portfolios, the telecom sector also boasts a few notable names that you can consider adding to your holdings.
Today, we will look closely at BCE (TSX:BCE), a leading Canadian telecom stock that can be a terrific addition to your self-directed investment portfolio for relatively safe and reliable long-term wealth growth.
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BCE
BCE is a $48.41 billion market capitalization giant in the Canadian telecom space, holding around a third of the market share. The company offers nationwide coverage across its core subscriber units, from wireline to wireless internet and even TV business segments. The giant generates recurring revenue, which accounts for the bulk of its overall cash flows.
While known more for its telecom and internet services, it has several radio an TV stations under its belt that comprise its media segment. The company’s media segment business diversifies its income, supplementing the substantial revenue its core business already generates.
Telecom businesses provide essential services, especially in this day and age. The nature of its services gives BCE stock a defensive appeal, which has only increased in the last decade.
Moving forward, telecom and internet services will only become more important worldwide. The growing demand for its services is already reflected in its earnings. In its most recent quarter, BCE stock reported its second-best-ever quarterly performance.
Is it a good time to buy BCE stock?
As of this writing, BCE stock trades for $53.07 per share, down by 19.17% from its 52-week high. There are several reasons for the downturn in its share prices. One of the primary reasons could be considered the series of aggressive interest rate hikes by central banks in Canada and the U.S. to combat inflation.
Companies of all sizes, especially larger companies like BCE stock, rely on debt to fund capital projects. When interest rates are higher, the debt repayment expenses eat into profits, creating short-term financial pressure for these companies.
While these factors have dragged its share price to lower levels, potential investors can consider it an opportunity to invest in its share prices at a bargain. Once interest rates start being slashed, BCE stock’s share price can begin soaring. Investing in its share price right now can help it capture massive capital gains once it begins its recovery.
Foolish takeaway
Now, blue-chip stocks are nowhere near being immune to the effects of market volatility. However, these companies are well-capitalized enough and have solid enough businesses to weather macroeconomic jitters and emerge stronger on the other side of bear markets.
BCE boasts a consistent industry-leading position among Canadian telecoms, reliable dividends, and an excellent track record of delivering stellar long-term growth to its investors. Considering these factors, BCE stock can be a great pick to add to your holdings, especially when its share prices are down and its dividend yield is inflated to incredibly higher-than-usual levels.
