BCE Stock: Buy, Sell, or Hold?

Clarification: Although BCE is known for historically raising its dividend, in May it cut its payout for the first time in 17 years.

One of the top telecommunications companies in Canada, BCE (TSX:BCE) is among the top dividend stocks many investors consider, due to this company’s consistent cash flows and historical ability to raise dividends even in sideways or down markets.

That said, there are bearish arguments to be made around this company. From pricing pressures tied to potential incoming regulation to bring prices down for consumers, to issues around delinquencies rising for mobile bills, there’s a lot for investors to parse through.

Here’s why I think BCE remains a buy (or a hold for investors who may feel uncomfortable with the headwinds facing this stock), and it’s certainly not a sell.

The bull case for BCE

If I were to pick a company I’d call a mature fixed income proxy, BCE would probably be near the top of any list I tried to put together. Indeed, the company’s massive size and entrenched status as a leading telecom provider in Canada has meant much slower growth than other similar options in the market. With revenue growing at a low-single-digit rate in recent quarters, this may be a stock many investors eschew in favour of other higher-growth names.

We all have different risk tolerances and growth preferences, so that’s a fair view.

That said, I think the fact that BCE has been able to grow its bottom line at a double-digit pace despite these relatively low revenue growth numbers is encouraging. I want to own companies that are growing profitably. By all accounts, BCE has shown the ability to utilize its scale and efficiency initiatives to boost its bottom line.

For those thinking long term, that’s a big deal.

Why BCE could be a stock worth buying on this dip

I think BCE’s recent acquisition of Ziply Fiber is intriguing, as this deal paves the way for more growth in the company’s wired business segment. As more consumers seek the fastest internet possible, this acquisition provides BCE with existing fibre already in the ground, avoiding high capital expenditures in the near term.

Some spending will likely come down the line as a result of this deal. But with BCE’s management team setting a compounded annual growth target of 15% moving forward, that’s the ultimate growth rate that matters to me.

BCE looks like a screaming buy here at under 5 times earnings.