BCE (TSX: BCE) is a falling knife dividend stock that’s starting to attract the attention of deep-value investors and yield seekers. Indeed, there may be challenges, but the baggage may very well be worth hanging onto for a shot at locking in the 8.73% dividend yield. Indeed, the big question is whether the payout is safe. Given BCE’s track record, I’d argue that it’s somewhat safer than it looks on the surface, even if there’s not much in the way of relief for the telecom and media firm.
Undoubtedly, the yield seems way too good to be true. And with more cuts being made (approximately 32 technicians recently lost their jobs last month) to the workforce, questions linger as to how deep the cuts will dig and when the firm will be able to get back on the growth track. Indeed, cuts and lower rates can only go so far. Eventually, the firm needs to prove that it can fare better in this less-than-ideal telecom industry environment.
With inflation in Canada falling below 3%, the green light seems to be shining for more Bank of Canada rate cuts. Indeed, these cuts could be a boon to BCE and the rest of the telecom scene. However, as attractive as BCE’s dividend is, I view more value to be had with some other dividend stocks, many of which have a clearer path to recovery in the second half.
Let’s check in with two names I’d rather consider over BCE. Though BCE stock is a great pick for the dividend, I’m not so sure the bottom in the stock is quite in yet.
Quebecor
Quebecor (TSX: QBR.B) is a Quebec-based telecom that has more ambitious growth prospects than BCE. Indeed, Quebecor is a far smaller telecom, with a valuation of $6.8 billion right here. It’s a mid-cap with a growth runway as it looks to expand its services beyond the Quebec market.
Further, the stock also looks quite a bit cheaper than the telecom heavyweight at current levels. Right now, QBR.B shares trade at 9.72 times trailing price to earnings (P/E). Compared to BCE stock, which still goes for over 23 times trailing P/E, Quebecor looks like an absolute steal.
Though the 4.5% dividend yield of QBR.B stock is relatively puny compared to BCE’s, I view it as having more room to grow over the next 10-15 years. Indeed, Freedom Mobile will take many years to catch up with rival services. However, with such a low multiple, I’d argue fortune favours Quebecor.
Restaurant Brands International
Restaurant Brands International (TSX: QSR) is a fast-food firm that I think has a far more predictable runway than BCE or any other telecom, for that matter. Indeed, the company behind Burger King and Tim Hortons could really thrive this summer as it looks to offer intriguing value options for hungry customers. The days of high prices at your local quick-serve restaurant seem to be winding down (hopefully for good). Nowadays, it’s all about cutting prices to win back some loyal business.
With a 3.18% dividend yield, QSR stock isn’t as bountiful as BCE, but it’s still one of the yield-heaviest fast-food options in the market right now. And with strong management and ambitious long-term growth hopes, I’d look to be a net buyer while shares are still off markedly from their highs. At 18.8 times trailing P/E, I think you’re getting a great deal from the name.
