Down 8.6%, This Magnificent Dividend Stock Is a Screaming Buy 

This magnificent dividend stock is trading at its 10-year low due to some headwinds. Its 8.1% dividend yield makes it a screaming buy.

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The year 2024 started on a positive note in hopes of interest rate cuts. However, delays in the rate-cut announcement pulled down the price of this magnificent dividend stock by 8.6%. BCE (TSX:BCE) stock has made a new low of $49.15. The last time the stock traded below $50 was 10 years back in 2014. Is this dip a once-in-a-decade opportunity to buy a value stock and lock in a yield of 8.11% for a long time? Let’s find out. 

Why did this magnificent dividend stock fall by 8.6%? 

BCE stock has been treading down since April 2022, when the interest rate hike began. While other stocks hit by high interest rates saw some recovery, BCE continued to fall and hit a 10-year low. The stock has slipped 33% from its April 2022 peak. The reason for this dip is more than just high interest rates. The telco has been in the news for quite some time as it is at loggerheads with the telecom regulator. 

In November 2023, the Canadian Radio-television and Telecommunications Commission (CRTC) announced a decision asking Telus and Bell to give competitors temporary access to their fibre-to-the-home networks in Ontario and Quebec. Now, the telcos spend billions of dollars on building the fibre network. This investment is beneficial as they can charge higher for internet services in an oligopoly market. Canada has some of the most expensive data packs, as telco charges are not regulated. 

BCE appealed against the regulator’s temporary ruling in the federal court, saying that the ruling disincentivizes investment in the network. To oppose the ruling and put pressure on the regulator, BCE announced plans to reduce its network investment by $1.1 billion by 2025, reaching only 8.3 million locations instead of the nine million planned before. 

BCE is also restructuring the business, moving away from highly regulated and slow-growth businesses to new growth areas of digital transformation, advertising, cloud and security services. It slashed 1,300 jobs in June 2023 and is likely to slash 4,800 more jobs as it sells some radio stations and The Source stores. The job cuts have got CRTC worried. 

BCE is a screaming buy 

In light of the uncertainty in government policies and massive restructuring, BCE has given a weaker outlook for 2024. It expects its free cash flow to fall by 3-11% as the massive job cuts will bring one-time severance pay. 

All this has reduced BCE’s stock price. If the telco succeeds in overturning CRTC’s decision, its stock could jump double digits. Moreover, announcements of interest rate cuts will also push the stock upwards. Now is the time to buy this dividend stock at its bottom. The company continued to increase its dividend at a slower rate of 3.1% from the earlier 5%. 

The telco will benefit from the 5G revolution that will connect more devices to the internet and significantly broaden the ecosystem. This secular trend will keep BCE’s long-term growth intact. 

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 Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

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