Is your portfolio diversified? Telecoms are often regarded as some of the best long-term options to add to any well-diversified portfolio for both seasoned and new investors alike. Chief among those telecom stocks is BCE (TSX:BCE), which is often regarded as the telecom to own. But can this gem of a stock help you become a millionaire?
Let’s try to answer that.
BCE is everywhere, and evolving – That’s a good thing
BCE is one of the largest, if not the largest telecom in Canada. It offers subscription-based wireline, wireless, internet, and TV services. The company also operates a large media segment that provides an alternative, yet complementary source of revenue.
Telecoms like BCE are regarded as being some of the most defensive options on the market. In fact, that appeal has only grown in the years since the pandemic started.
Investors should note that the inflation which led to rising interest rates last year has spilled over to all parts of the market, including BCE’s. Telecoms are capital-intensive businesses that rely on debt to fund expansion and when free cash doesn’t cover it, dividends.
Recently BCE announced a series of layoffs to trim its workforce and costs. Specifically, the telecom is looking at annualized cost savings of $250 million by shedding nearly 9% of its workforce.
Those cuts include shuttering some of BCE’s radio stations in what the company refers to as a transformation. That transformation is from a traditional telecom to a provider of tech services and digital media.
To accomplish that feat, the company is partnering with Best Buy Canada to rebrand The Source stores into Best Buy Express outlets.
It’s an intriguing thought, but will that venture help you become a millionaire?
The income is very attractive
One of the main reasons why investors turn to BCE is for the dividend it offers. And it’s that dividend which can help you become a millionaire over the longer term.
As of the time of writing, BCE pays out a quarterly dividend, with a yield of 7.96%. That makes BCE one of the highest-paying yields on the market, which is insane considering the stock’s defensive appeal.
To illustrate the earnings potential of that insane yield, let’s assume an investment of $40,000 is made in BCE (always as part of a larger, well-diversified portfolio). For that initial outlay, investors can expect to generate a first-year income of just over $3,170.
The reason I say first-year is because investors who aren’t ready to draw on that income yet can choose to reinvest that income. This allows any eventual income to grow, and by extension, lets BCE help you become a millionaire.
Oh, and let’s forget two other key points to consider. First, BCE has been paying out juicy dividends for well over a century without fail. BCE has also provided annual upticks to that dividend for over a decade. This fact alone makes the stock a great long-term option to help you become a millionaire.
Second, and perhaps more importantly, BCE trades at a big discount right now. As of the time of writing, BCE trades less than a dollar off its 52-week low. Looking out over the prior two-year period we can see the stock trading down 24%.
The bottom line: BCE can help you become a millionaire
No stock is without some risk, and that includes defensive top picks like BCE. That’s part of the reason why investors are often told to diversify their portfolios with a broad number of positions from different segments of the market.
So then, can BCE help you become a millionaire? It’s not a straight yes or no answer, but let’s just say yes, but not on its own. BCE still needs to be part of a well-diversified portfolio.
In short, BCE is an excellent long-term option to consider, particularly now that the stock still trades at a juicy discount.
