The Canadian telecoms have been under quite a bit of pressure in the past several quarters. Unsurprisingly, it’s not hard to imagine that many passive income-focused retirees have ditched the big telecom names (the so-called Big Three) in favour of other less-volatile dividend payers. Though their recent multi-year slides (that have brought many toward multi-year depths) is unprecedented, I think it’s a tad too late to be throwing in the towel after the fact.
Indeed, the pain has already been dealt, with nearly 50% plunges already being dealt to shares. Though it could take quite a while for the names to turn a corner, especially amid trade war uncertainties (yesterday was the first day of tariffs and perhaps the beginning of a cold, brutal trade war) and the potential threat of an economic recession or the return of inflation, or both at the same time (a stagflationary scenario?).
While the telecom dividends may be swollen, they may not be the growthiest and best-covered in the world. Either way, if you seek a good mix of value and income, perhaps they’re worth checking out as they try to put an end to their painful bear markets. Let’s check in on two telecom plays in BCE (TSX:BCE) and Rogers Communications (TSX:RCI.B) to see which, if either, is the better value pick-up for March — a month that’s had quite the volatile start, with the TSX Index and S&P 500 in turmoil following day one of Trump’s tariffs.
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BCE
First, let’s have a look at the ultra-high-yielder in BCE, which has boasted a dividend yield close to the 12% level for the past two and a half months. At the time of writing, the hard-hit telecom yields 11.8% – a massive yield that may be destined for the chopping block in a matter of months. Indeed, there have been countless articles on BCE’s yields and the high chance of a dividend reduction.
I think it’s safe to say that many investors getting into the name don’t expect the nearly 12%-yielding dividend to stay at these heights forever. While a dividend cut may be harder to avoid with every leg lower, I do think that even a substantial cut would still entail a very generous, above-average yield that’d be more than enough incentive for dividend investors to keep sticking around.
If the dividend gets cut in half, you’d still have a sizeable 6% yield. For now, the dividend has survived a brutal past few years. And until the cut finally does happen, there’s still hope for passive income lovers. Either way, the Canadian wireless market faces a ton of headwinds as the trade war drags down the economy. That said, I think most of the woes are already expected. Analysts don’t exactly have high hopes for the firm in 2025.
With such low expectations could come some better-than-feared results and perhaps a bit of a relief rally. For a stock that’s been so battered (shares down around 53.5% from all-time highs), a small hint of good news may be enough to power shares back above the $35 per-share levels.
Rogers Communications
Rogers Communications seems to be in a similar spot as BCE. The Canadian telecom industry is in a tough place and layoffs (Rogers recently laid off customer service staff) haven’t been uncommon. With Rogers stock now down close to 46% from its highs, the yield has swelled to a generous but quite sustainable 5%. Indeed, for value investors seeking more dividend stability, Rogers could be the better bet. At 12.5 times trailing price-to-earnings (P/E), the name also looks incredibly cheap.
Between BCE and Rogers, I think investors should buy a bit of both, if not for the dividends, for the bounce-back potential should Canada’s economy catch a break, perhaps if tariffs are lifted (hopefully sooner rather than later!).
