1 Dividend Stock Down 23% to Consider Now

This top TSX dividend-growth stock now offers a yield of 8.5%.

| More on:
Target. Stand out from the crowd

Image source: Getty Images

BCE (TSX:BCE) is down 23% in the past 12 months. Contrarian investors seeking top dividend stocks with high yields are wondering if BCE stock is now undervalued and good to buy for a Tax-Free Savings Account (TFSA) portfolio or Registered Retirement Savings Plan (RRSP) focused on passive income or total returns.

BCE stock

BCE trades near $46.50 at the time of writing. The stock is close to the 12-month low of around $44 and is way off the $74 it reached in the spring of 2022.

The decline over the past two years has been difficult to watch for long-term holders of BCE stock. Many retirees and other income investors own BCE as a core holding in their dividend portfolios. The stock has historically been a solid investment, so the big pullback is a bit of a shock. BCE is the largest communications company in Canada and the business enjoys a good competitive moat while providing essential mobile and internet services to commercial and residential customers across the country.

Much of the pain over the past 24 months can be attributed to the steep rise in interest rates. BCE spends billions of dollars every year on network upgrades. The company uses debt to finance part of the capital program, so higher borrowing costs will put a dent in earnings and can reduce cash that is available for distribution to shareholders. The Bank of Canada raised interest rates to get inflation under control by cooling off the economy. Inflation was around 8% in June 2022. The April 2024 inflation report came in at 2.7% in Canada, so progress is being made. In fact, economists widely expect the Bank of Canada to start reducing interest rates in the next few months to avoid pushing the economy into a recession.

As soon as the rate cuts begin, BCE could see renewed interest in the stock.


Interest rates have likely had the largest impact on BCE’s share price, but they aren’t the only issue. BCE’s media division is navigating a decline in ad spending across the television and radio segments. Customers are either trimming marketing budgets to preserve cash or shifting the spending to digital alternatives. These challenges won’t disappear in the near term. BCE announced staff cuts of about 6,000 positions over the past 12 months to adjust to the market conditions while positioning the business to meet its financial targets.

In addition, regulatory uncertainty is always a concern for Canada’s telecom operators. People complain that prices are too high for mobile and internet services. A federal election is due before the end of October in 2025, so there could be some renewed focus on communications costs over the next 12-18 months.

Forcing the owners of the fibre optic lines to provide access to competitors is one idea that comes up for discussion. This reduces the incentive for BCE to invest in the infrastructure the country needs to ensure firms and households have world-class wireline connections. Canada is a large country with a relatively small and spread-out population. The investments required to build and maintain the national communications networks are extensive, so it would make sense that rate plans might be higher than in countries where the population is concentrated in a much smaller area.

Finally, price wars over the past year have actually been quite intense, especially on the mobile side of the business. This could lead to lower long-term revenue if price reductions stick.

It might also, however, help ease the pressure from regulators.


BCE raised the dividend by about 3% for 2024. This is less than the 5% average hike the company has given investors over the previous 15 years. Higher borrowing costs are partly to blame. Once interest rates start to decline, debt expenses should decline. Reduced staff expenses should also help the bottom line in the next couple of years.

At the time of writing, the dividend provides a yield of 8.5%. The payout should be safe. BCE expects 2024 revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be in line with 2023 or slightly higher.

Should you buy now?

Ongoing volatility should be expected over the next couple of years and a retest of the 12-month low is certainly possible. That being said, BCE pays an attractive dividend and the stock already looks cheap based on the financial guidance.

If you have some cash to put to work in a portfolio focused on high-yield dividends, this stock pays you well to wait for a recovery and deserves to be on your radar right now.

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 Andrew Walker owns shares of BCE.

More on Dividend Stocks

A worker drinks out of a mug in an office.
Dividend Stocks

1 Dividend Stock to Buy if the Bank of Canada Keeps Cutting Rates 

This dividend stock is sure to benefit from ongoing cuts in the key interest rate and is already seeing some…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

How Much Cash Do You Need to Quit Work and Live Off Dividend Income

Toronto-Dominion Bank (TSX:TD) pays a lot of dividend income. Can you live off of it in retirement?

Read more »

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.
Dividend Stocks

Invest $10,000 in This Dividend Stock for $1,398.40 in Passive Income 

This dividend stock offers a whopping 11.9% dividend yield right now, with returns that should fly high for this cyclical…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

This 6.1 Percent Dividend Stock Is My Pick for Instant Income

Here’s what makes Transcontinental one of my top dividend stock picks right now for instant income.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

For a Shot at $5,000/Year in Passive Income, Buy 1,000 Shares of This TSX Stock

Do you know you can build passive income with TSX stocks? A $22,000 investment can give you a shot at…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

A new Canoe EIT Income Fund (TSX:EIT.UN) investment could earn almost 9% yield annually, and the monthly dividend stock has…

Read more »

RRSP (Registered Retirement Savings Plan) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

RRSP Wealth: 2 Great Dividend Stocks to Own for Total Returns

Dividend stocks like Fortis Inc (TSX:FTS) can be great additions to a well-diversified portfolio.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Cheap Stocks to Add to Your TFSA Before They Get Expensive

The stock market has some lucrative TFSA stocks trading at multi-year lows. Now is a good time to buy these…

Read more »