Is BCE Stock the Best High-Yield Dividend Stock for You?

While it might now double your money in the short term, BCE stock can help you generate reliable passive income for decades.

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If you are looking for a safe Canadian dividend stock with a high yield that can provide steady passive income, you might want to consider BCE (TSX:BCE) stock. It has a long history of rewarding investors with attractive dividends and increasing them over time. Last month, the company declared a 3.1% increase in its yearly dividends per share compared to the previous year, extending its dividend-growth streak to 16 years. With this, it currently offers a very attractive yield of around 8.7%.

But is BCE stock the best high-yield dividend stock for you? Here are some factors to consider before investing in this telecom giant.

BCE owns Bell, which is the biggest communications provider in Canada, and it has a diversified portfolio of various internet services and media assets. This Verdun-headquartered communications giant currently has a market cap of $42.2 billion as its stock trades at $46.06 per share with about 12% year-to-date losses.

In 2023, BCE’s total revenue rose 2.1% YoY (year over year) to $24.7 billion, marking the third consecutive year of positive top-line growth. Continued strength in its fibre internet net subscriber activations and positive sales growth in the residential internet segment were two of the key factors that drove its total revenue higher last year.

Even as ongoing macroeconomic challenges continued to affect the consumer spending environment and the advertising market, BCE’s adjusted annual EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2023 grew positively by more than 2% YoY to $10.4 billion. Interestingly, its 2023 adjusted EBITDA margin also stood firm at 42.2% without any notable change from the previous year. As a result of its strategic moves in the wireless and internet service segments, BCE posted an adjusted net profit of $2.93 billion last year, exceeding Street analysts’ estimates of $2.82 billion.

What’s next for BCE?

As the ongoing macroeconomic challenges continue to create external pressures, BCE aims to achieve a balance between growth and financial performance in 2024. The company plans to reduce its capital expenditure by $500 million in the ongoing year and cut it by around $1 billion in the next two years. This strategic move showcases its continued focus on optimizing current operations and redirecting resources towards more lucrative, future-oriented ventures, which should ultimately help BCE boost its profitability over the long term.

In the years to come, BCE is also likely to benefit from its ongoing efforts to transition from a traditional telco to a tech services and digital media powerhouse. Besides that, its consistent focus on strengthening its 5G presence across Canada could help the company accelerate financial growth.

Is BCE stock the best high-yield stock to buy now?

While the ongoing economic challenges have taken a toll on BCE’s profitability, its revenue growth continues to be positive. Despite these challenges, the company’s recent decision to raise dividends reflects its ability to generate strong cash flow and its commitment to returning value to shareholders.

If you’re looking for a growth stock that can double or triple your money in a few years, BCE stock might not be the best choice for you. However, if you’re looking for a stable and reliable income stock that can pay you consistent dividends and protect your capital from market volatility, BCE might be one of the best high-yield Canadian stocks to buy now on the dip.

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.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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