With the Bank of Canada now in a rate-cut mode, passive-income investors may be wondering if now’s the time to give the beaten-down, battered telecom stocks another look. Undoubtedly, if you stopped keeping tabs on the Canadian telecom titans, you’re probably not alone. They’ve been major dogs for the broad TSX Index in recent years. And with more headwinds and a lack of timely catalysts, it seems better to take a rain check on some of the heavy dividend yields or, at the very least, come back to the names once they’ve shown some signs of life.
Though nobody knows when and where telecom stocks will settle, I think the swelling yields are worth your attention if you seek big passive income on the cheap. Let’s check out three telecom plays that yield-hungry investors may find difficult to pass up as rate cuts gradually bring forth some relief over the next two years. Lower rates won’t fix the fundamental issues weighing down each telecom stock. But they are welcomed, especially at this point in their respective downtrends.
BCE
BCE (TSX:BCE) stock’s dividend yield is flirting with the 9% mark, currently sitting at 8.83%, close to the highest we’ve seen since the multi-year depths hit back in April of this year. Undoubtedly, the gains since then seem to have been given back, with BCE stock at risk of making new multi-year depths. As tempting as the nearly 9% dividend yield is, there are some issues that need to be addressed before the stock may have Mr. Market’s permission to rally sustainably higher again.
Competitive pressures seem to be causing customer turnover. And until BCE can beef up retention without cutting prices (and margins) to the bone, I don’t see any easy answers for the firm. The good news is the dividend looks to be on relatively stable footing. The big questions investors should focus on, though, are whether the downside risks stand to exceed the dividend yield.
Telus
Telus (TSX:T) stock seems to be in the same camp as BCE, with its stock flirting with new multi-year lows again at around $21 and change. The dividend yield of 7.17% is also close to the highest I’ve seen outside of crisis-level conditions. With the firm positioned to keep spending on its 5G infrastructure, lower rates are a major plus.
However, one small rate cut isn’t going to make a world of difference for the firm when it reports its next quarter. Either way, I think Telus stock is starting to look attractive now that it’s shed 38% from its all-time high. Telus is in a competitive environment and one that could entail lower prices and milder earnings growth from here, even with rate cuts considered.
Quebecor
Quebecor (TSX:QBR.B) stock isn’t crashing nearly as hard as some of its peers in the Canadian telecom scene. However, the stock has been rather uneventful after having gone virtually nowhere since 2018. Indeed, it’s been a slog for investors, but as the firm looks to take telecom competition up a notch, I view QBR.B as the telecom that could enjoy greater dividend growth.
At writing, the yield sits at a relatively mild 4.46%. Also, at 9.7 times trailing price to earnings, the stock looks like a severely undervalued bargain for investors willing to embrace the choppiness.
