If there’s a single word that defines how the market has fared this year, it would be volatile. The extent of that volatility seems to be shifting with each passing week, putting some otherwise TSX giant stocks into discount territory.
One such example is BCE (TSX:BCE), which not only trades well into discount territory but also has some significant upside for investors who have an appetite for risk.
Let’s jump into whether this TSX giant belongs in your portfolio right now.
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BCE is an opportunity, but with its own set of problems
As of the time of writing, BCE trades down just over 2% year-to-date. Looking further back shows the stock trading down a whopping 31% over the trailing 12-month period. That makes the stock a highly discounted option to consider.
That being said, BCE is not without problems. The company instituted deep cuts to its business last year. Those cuts were largely brought on by spiralling debt levels, which were fueled by higher interest rates and lacklustre revenue from inflation-wary customers.
In short, the cuts were a necessary pain point that needed to be addressed. Those cuts included slashing the workforce and shuttering many of BCE’s radio stations across the country.
As part of that cost-cutting spirit, BCE also sold off its valuable stake in MLSE, but not to pay down debt, but rather to fund growth.
Specifically, BCE acquired U.S.-based Ziply, which is a fibre operator in the Pacific Northwest region. The company currently serves over 1.3 million customers, and BCE plans to push that number to 3 million.
The acquisition pushes BCE into an underserved U.S. fibre market, which is something that neither of its big telecom peers can offer.
In other words, there is some growth potential for investors to realize now from the TSX giant.
BCE is adjusting and improving
Apart from the long-term growth appeal from that acquisition, BCE is improving in other areas, too. The telecom recently announced results for the first fiscal of 2025 earlier this month. In that quarter, the company saw net earnings jump 49.5% to $683 million. The telecom also saw free cash flow increase to $798 million in the quarter.
The results were a welcome improvement, but the most intriguing part of that announcement was regarding BCE’s dividend. Before the earnings announcement, BCE’s quarterly dividend paid out an insane, and more importantly, unsustainable 13% yield.
Part of the reason for that inflated yield can be traced back to the stock’s dismal drop over the past several years.
BCE announced it was slashing that dividend, which would now be set at an annualized $1.75 per share, or $0.4375 quarterly per common share. This reduces the yield to a more sustainable 5.8%.
To put it another way, BCE’s obligation to pay out to shareholders annually has dropped from $3.3 billion to $1.6 billion.
That huge difference leaves BCE with a still-competitive, yet now (and arguably more importantly) sustainable dividend that is roughly on par with its peers.
This means that investors with $7,000 to invest in this TSX giant will earn an income of over $400. Reinvested, those dividends will translate into over a dozen new shares each year.
Throw in the expected growth from the stock, and you have a stellar long-term opportunity for investors.
Should you buy this TSX giant?
BCE was once regarded as one of the most defensive stocks on the market. BCE still boasts defensive appeal, but the stock has left investors wondering whether it still warrants a place in portfolios.
BCE’s recent movements to rein in costs, including slashing its dividend, are encouraging. They not only make the TSX giant an intriguing income play (thanks to a more sustainable dividend), but also give BCE the lifeline it needs to continue investing in growth.
In my opinion, BCE is an intriguing long-term option for income and growth-seeking investors as part of a larger, well-diversified portfolio.
