The term “blue chip” in the stock market refers to trusted companies whose stocks are of high investment quality and are too big to fail. These industry-leading companies are also the top-of-mind choices of income-oriented investors. Many Canadian companies have long attained blue-chip status and cross-listed in the U.S.
If you’re chasing dependable dividend income or building retirement wealth, invest in Bank of Nova Scotia (TSX: BNS) and BCE (TSX: BCE). Both companies have been paying dividends for more than a century. Economic downturns, including recessions, did not stop them from stopping payouts to shareholders. In 2024, BNS and BNS are among TSX’s high-yield, blue-chip stocks.
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Enterprise Strategy
Canadian big banks have weathered massive headwinds in the inflationary and high-interest-rate environment. Like its industry peers, BNS had a credit strain. In the first quarter (Q1) of fiscal 2024, provision for credit losses (PCL) rose 50.8% to $962 million versus Q1 fiscal 2023.
Nonetheless, in the three months ending January 31, 2024, total revenue and net income increased 5.9% and 25.1% year over year to $8.43 billion and $2.2 billion. BNS president and chief executive officer (CEO) Scott Thomson cited strong revenue growth, margin expansion, and expense discipline for the solid quarterly earnings.
The $61.3 billion bank completed a strategic review process and introduced the “Enterprise Strategy,” a go-forward strategic plan in December 2023. Thomson added that BNS is making progress on its new strategy.
According to Thomson, besides its many competitive advantages, BNS has a strong foundation for growth. He said the businesses in the bank’s client franchises have grown and scaled in recent years. They now enjoy top-tier competitive positioning in their respective markets.
BNS invested more than $3 billion to expand its domestic wealth business. It continues to sharpen its geographical footprint and reduce risk by higher-risk geographies. Thomson said 80% of earnings come from North America and the Caribbean.
“2023 has been a year of transition. We have been focused on strengthening our foundation to improve our resiliency and prepare the bank to execute on our profitable growth aspirations,” said Thomson. He assures that BNS has materially strengthened its balance sheet with capital and liquidity metrics.
At $67.49 per share (+6.38% year to date), the dividend yield is 6.32%, the highest among the Big Six banks.
Balancing act
BCE immediately announced a 3.1% dividend hike following the release of its Q4 and full-year 2023 results. If you invest today ($49.39 per share), the dividend offer is 8.12%. However, the $45 billion telecom giant implemented a workforce restructuring and let go 9% of all BCE employees in 2024. The move will translate to $250 million in cost savings annually.
Net earnings in Q4 and full-year 2023 declined 23.3% and 20.5% to $435 million and $2.32 billion, respectively, compared to the same periods in 2022. Still, BCE and Bell Canada president Mirko Bibic said the Bell team delivered solid results in Q4 and throughout 2023.
Bibic added that BCE balances near-term and long-term priorities for customers and shareholders. The telco titan also plans to reduce capital expenditures by over $1 billion in 2024-2025. In Q4 2023, free cash flow reached $1.29 billion on lower capital expenditures.
Safe investments
BNS and BCE are no-brainer stock purchases in Canada, and not because of popularity. They are blue-chip investments, first and foremost, and your money is safe with them.
