If you’re a passive-income investor looking for a bit more yield for your buck, you’re probably feeling tempted to pick up just a few shares (maybe as a part of a starter position) in long-time telecom top dog BCE (TSX: BCE). Undoubtedly, it’s been a retiree-friendly dividend darling for such a long time. With shares in a historic multi-year slump, however, it could prove tough sledding from here as the firm gives everything it’s got to bottom out.
Whether the firm has what it takes to support a sustained rally to last year’s 52-week highs or even all-time highs (the $73 and change level seems so far off now!) remains the big question that many Canadian investors have been asking. While the 11.66% dividend yield is bound to be the number-one figure grabbing the attention of investors, I’d argue that it’s the cash flows that matter more. Indeed, the stretched dividend yield does not mean much if it’s due (perhaps even overdue) to be slashed—something that many analysts think is an inevitability.
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BCE stock has been battered, but a turnaround could take some time
Although I believe BCE will find its way, the telecom titan remains less than timely, at least in my opinion. Several analysts have been downgrading the stock, citing a wide range of issues that could take time to iron out.
With financial pressures likely to persist through 2025, BCE stock stands out as a deep-value play that’s only fit for an investor willing to ride out another several years of volatility. Oh, and let’s not forget about the potential response to a dividend reduction, which could be served up at any time. In any case, management has their work cut out for them. Whether they can pole-vault over the low earnings “bar” set ahead of them will be a topic of discussion in February.
Chief Executive Officer Mirko Bibic is a seasoned veteran who is upbeat about his abilities to weather the continued storm as his firm aims to chip away at debt while taking steps to jolt subscriber growth. I can’t say I share Mr. Bibic’s sense of optimism. However, I would be inclined to change my tune should next week’s earnings and full-year guidance top results.
Enbridge stock: A dividend juggernaut that looks poised for a breakout
For now, I’d much rather look to “growthier” dividend stocks that can gain along with the rest of the market for the year ahead. And there’s no shortage of them as the TSX Index steadily surges back to new all-time highs. At this juncture, I’m a bigger fan of Enbridge (TSX: ENB) and its sustainable 5.9% dividend yield.
The stock is also picking up steam, now up 34% in the past year, with new all-time highs in sight. With a fresh dividend raise and an upbeat forecast delivered at the end of last year, I think the pipeline kingpin is back to being a market darling. Indeed, the steep discount on shares is all but gone, but I still think the name is worth picking up ahead of what could be its breakout moment.
Indeed, Trump tariffs could complicate matters for the broad Canadian energy sector, but I don’t think they’ll take away from the long-term narrative, which hasn’t looked this good in a while. At 21.1 times forward price to earnings (P/E), the midstream energy giant looks like a potentially better buy as it rolls on with projects that will feed its generous dividend growth.
