BCE (TSX:BCE) stock is arguably one of the most enticing falling knives, not just in the Canadian telecom scene but the entire Canadian high-yield universe. When you hear of the telecom titan, what do you think of? Relative stability, market dominance, a generous dividend, and a lower beta (less correlation to the TSX Index) may come to mind.
Undoubtedly, BCE stock has crumbled like a paper bag (around 40% peak to trough) since topping out back in the first half of 2022. That’s some serious downside for a stock that many retirees and cautious investors likely owned for the long term, primarily because of the impressive dividend.
The 5G boom may have enticed investors to jump into the stock when it blasted off, pretty much going parabolic in the back half of 2021. As it turned out, even chasing a seemingly safe blue-chip stock like BCE was a bad idea. Not only did the parabolic pop enjoyed almost three years ago end in devastating fashion, but I’m inclined to argue that the selling was overdone, as many rushed to hit that buy button.
BCE stock has been through a lot
A combination of higher interest rates, intense competition, hefty labour and infrastructure expenditures, and economic headwinds has contributed to BCE stock’s ugly demise. However, I believe that it’s far too late to smash that sell button.
At 1.7 times price to sales (P/S) and 15.15 times forward price to earnings (P/E), BCE stock is starting to look extremely cheap. And, of course, the 8.69% dividend yield continues to be a star of the show. As earnings begin to normalize and trend higher, I think BCE stock could regain many of the sellers it had lost in recent years.
At the end of the day, BCE is one of the top national telecoms that stands to gain from the secular tailwind in next-generation wireless.
Opinion: The next five years could be kinder to BCE stock
I expect more connected devices to hog more wireless data in five years. Many will connect to BCE’s network. We’re not just talking artificial intelligence (AI)-enabled smartphones, but perhaps smartwatches, headsets, and, of course, perhaps AI-drive lapel pins (the Humane AI pin), handhelds (like the Rabbit R1), and other Internet of Things gadgets that we can’t even comprehend quite yet.
On that front, BCE stands out as having incredible speeds and awesome coverage around various localities nationwide. Of course, we will not all rush out and buy data-hungry devices tomorrow. Not when the economy is sluggish, with some talking heads blurting out the “s” word (stagflation) in the mainstream media.
In any case, I like BCE’s long-term trajectory, and I’m not afraid to be bullish and optimistic about a stock that’s hovering close to lows not seen in several years.
With the firm recently reporting a year-over-year fall in quarterly profit, investors have the right to be concerned. However, the firm is going through a sizeable restructuring, and that entails a great deal of one-time costs. With good new postpaid additions (more than 45,000 in the latest quarter), I think there are some pluses in a quarter that many may overlook.
Bottom line
In short, BCE will probably be in better shape in five years as it moves on from its rough, headwind-plagued environment, while restructuring and secular tailwinds have a chance to drive the business higher again. Yes, it’s hard to be optimistic about BCE, but I think the latest quarterly results were decent.
