Where Will BCE Stock Be in 3 Years?

BCE (TSX:BCE) stock is skating through tough times, but is it flying in no-man’s land for income investors?

| More on:
edit Woman in skates works on laptop

Image credit: Photo by CIRA/.CA.

BCE (TSX:BCE) stock’s dividend yield makes it a must-watch stock as it continues to drop like a rock tumbling down a seemingly endless hill. Undoubtedly, it’s been tough to buy the dip in the name, as bad news has continued to pile up for the telecom and media heavyweight. From mass layoffs to less-than-stellar quarterly results, BCE has been a rough ride for investors. For many, the ride has proven rough enough to warrant throwing in the towel.

Undoubtedly, BCE stock has been a turbulent ride, even before the collapse of 2022 and 2023 (and thus far in 2024, with shares down 9% year to date). Over the past five years, the stock has lost around 17% of its value. And over the past 10 years, shares are basically flat. Undoubtedly, if BCE stock struggled to sustain capital gains over an extended period, what chance does it have in the next 10 years, as new technologies such as artificial intelligence come to be?

Though the 5G wireless tailwind (is it still in effect?) could still pave the way for impressive wireless growth as new wearable devices hit the mainstream (spatial computers and AR/VR headsets, anyone?), BCE has some issues it needs to address as it looks to restructure.

Fortunately, relief could be on the way as interest rate cuts begin to flow in. And though some may be inclined to question the safety of BCE’s long-time dividend, which currently yields almost 8%, I’d argue that though cash flows aren’t in an ideal spot, dividend hikes (as opposed to cuts) may very well be the likelier over the next few years.

Tough times could continue

BCE’s been through trying times before, but arguably, things could improve before they get more dire as Canada looks to shrug off what remains of inflation and all the macro pressure points accompanying it. At writing, BCE has a pretty stretched free cash flow payout ratio. And though some sort of dividend reduction would help BCE shore up some greater financial flexibility, I’d argue that there exist many pathways in which the firm can recover without having to take its dividend to the chopping block.

Remember, a lot of BCE shareholders are hanging on for dear life, primarily for the dividend. If BCE breaks these investors‘ hearts, it will be very hard to win their trust and respect back.

Some of the bears out there think the dividend could be at risk if the free cash flow trajectory can’t pick up. Although I wouldn’t rule out a potential partial dividend cut at this juncture, I do view the stock as a great value if you’re willing to hold through what is sure to be a choppy next couple of years.

The bottom line on BCE stock

In three years, I view rates being considerably lower. And as BCE looks to spend more on its wireless infrastructure, I’d be quite shocked if BCE stock isn’t considerably higher in three years from now. Of course, bottom fishing is hard and painful. With BCE stock at lows not seen in many years, dip-buyers will be catching a blue-chip falling knife that could continue cutting deep.

Though it’s good to hope for a sustained dividend, I think it’s a better idea to view BCE as a deep-value play whose payout may or may not survive the onslaught. That way, you won’t be discouraged if worse comes to worst and the firm has to trim its payout. If it helps bolster the recovery trajectory, perhaps some investors will be all for it.

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.

More on Tech Stocks

falling red arrow and lifting
Tech Stocks

Is Shopify a Buy, Sell, or Hold?

Shopify (TSX:SHOP) stock has been pulling back of late, opening up a window for dip buyers.

Read more »

Different industries to invest in
Tech Stocks

2 No-Brainer Growth Stocks to Buy Now With $2,000 and Hold Long Term

These growth stocks have already proven their worth this year, but are solid investments for long-term holders as well.

Read more »

woman data analyze
Tech Stocks

1 Stock That’s Just as Hot as Nvidia (Without All the Hype)

Nvidia (NASDAQ:NVDA) stock has surged in share price, but so has this stock, with a far lower share price to…

Read more »

Index funds
Tech Stocks

Constellation Software Stock: Buy, Sell, or Hold?

Unveiling the Code: Should you Buy, Hold, or Sell Constellation Software (TSX:CSU) stock at current levels?

Read more »

A plant grows from coins.
Tech Stocks

Got $5,000? These Are 2 of the Best Growth Stocks to Buy Right Now

Growth investors should have these two tech stocks high up on their watch lists.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Tech Stocks

Well Health Stock Is Down 58% From its Highs – Time to Buy?

Well Health stock has been hit, but the company remains on a path of record-breaking revenues as it approaches positive…

Read more »

Business man on stock market financial trade indicator background.
Tech Stocks

TFSA: The Most Expensive Stock in Canada Is a Top Buy Today

CSU stock (TSX:CSU) may be the priciest stock on the TSX today, but there is a very good reason for…

Read more »

TFSA and coins
Dividend Stocks

TFSA: Invest $15,000 in CSU Stock and Get $4,694 in Passive Income

CSU stock (TSX:CSU) has surged in the last year, yet even if growth slows by half, you could create immense…

Read more »