BCE (TSX:BCE) stock is the telecom titan with the supersized dividend yield. Over the past month, shares of the name cratered more than 15%, bringing the yield north of the 10% mark. And no, that’s no typo; shares of BCE now yield 10.1%. But before you double down on the name, there are some concerns as investors look to digest some rough third-quarter (Q3) results.
Notably, the latest Q3 numbers were weighed down heavily by asset impairment charges. Additionally, it doesn’t look like the firm will be getting any form of relief from the federal government anytime soon. In short, things seem to be going from bad to worse for the dividend heavyweight. And I’m not so sure what the fate of the dividend will be over the next year.
Personally, I would not get my hopes up as an income investor looking to get into the name here. No yield at, around, or over 10% is fully secure, at least in my view.
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Towering yields can be risky to chase
While its yield is one of the most tempting for passive income investors in Canada, I’d argue that investors should look beyond the sheer size of the upfront dividend yield. Undoubtedly, there are a lot of issues the $35.4 billion telecom will need to confront over the coming quarters and years. And at this juncture, I’m not so sure there’s an easy solution that can help the firm finally turn a corner after many years of slogging.
That’s not to say that shares of BCE are any sort of value trap. I think that at just under $39 per share, BCE stock is closer to a bottom than a top; there’s still no telling when the stock will start marching higher again. As is the case for most falling knives, investors should brace themselves for near-term pain as they seek to lock in the dividend and a shot at a bounce back.
In short, unless you’ve got at least seven years to invest, I’d look at some of the timelier opportunities out there, many of which can deliver more on the total returns front (think capital gains and dividends) over the medium term.
So, what dividend stocks could be a better bet than BCE stock as it slumps to depths not seen in over a decade?
TD Bank
TD Bank (TSX:TD) is having an awful year of its own, now down around 8% as investors feel the aftermath of the money-laundering fiasco.
The dividend yield sits at 5.17%, which is very competitive relative to other Big Six banks. And while the $138.6 billion Canadian bank may have limited growth prospects now that it seems to be shut out from some opportunities in the U.S. market, I still think the name is worth the tide as new managers come onto the scene to help make the bank a top trusted financial again.
TD has a new anti-money laundering top boss aboard and a new chief executive officer who’s capable of leading TD Bank back to new highs. Undoubtedly, investors may not be too quick to forget about the brutal past few years. However, if you seek a credible turnaround plan and a swollen yield, I’d argue TD stock is one of the best names to look at right now. The dividend is more than safe, and the bank has more than enough liquidity to either ramp up its dividend growth or pursue domestic mergers and acquisitions to jolt earnings.
