Higher yields are getting harder to come by, but that’s only natural in a bull market where stocks just keep moving higher while yields look to fall. Of course, with great earnings growth comes faster, and perhaps more generous, dividend growth. But, at this pace, it feels like capital gains could drive yields far lower.
Either way, a 4% dividend yield is suddenly considered quite attractive, especially as investors look to opt for dividend stocks that aren’t nosediving with no bottom in sight. Undoubtedly, some of the telecom names have been free-falling endlessly in the past three years. And while the telecom industry remains a tough place to compete, I do think that the industry is all about the haves and have-nots.
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Rogers Communications: Deep value hiding in plain sight?
When it comes to Rogers Communications (TSX:RCI.B), it’s been more of a have-not when you look at the longer-term chart. However, when you consider the sharp bounce off the 2025 lows, I think it’s more evident that Rogers Communications may very well be the best of the Big Three.
Now, the stock is still down from its all-time highs, but, at the very least, the shares have been able to climb around 50% off of rock-bottom levels. Now that shares are consolidating again, I do think that value investors might have a chance to pick up shares while they hover on the lower end of the consolidation range, at a few dollars below $50 per share. Upon first glance, shares of RCI.B might seem like a deep-value trap more than a real value play that could surge to the upside.
The shares trade at 4.4 times trailing price-to-earnings (P/E), which is pretty absurd for a company that generates as much cash as Rogers does. With a good mix of sports assets that provides investors a chance to own some teams within their favourite leagues (whether that’s the Maple Leafs of the NHL or the Blue Jays, Canada’s MLB team), Rogers definitely brings some unique, even exciting assets to the table beyond the telecom business. It’s a fun “trophy” asset to brag about, especially as Rogers takes 100% control over MLSE (Maple Leafs Sports and Entertainment).
With solid synergies juiced from the acquisition of Shaw Communications and a dividend that’s large enough to keep most income investors satiated without stressing out the balance sheet, I do think Rogers stands out as more of a real value play that will pay investors to wait things out, rather than a trap that’s stuck in limbo for a while longer while industry headwinds linger for longer. Moving ahead, expect Rogers to turn CapEx down a few notches while the firm trims debt and pays the dividend.
Prem Watsa’s bet
Perhaps the biggest reason to believe in the Rogers value case is the vote of confidence from Prem Watsa, the man known as the Warren Buffett of Canada. Through his firm, Fairfax Financial, Watsa picked up more than 150,000 shares in the last (second) quarter.
Indeed, Mr. Watsa is a classic deep-value seeker who’s all about dirt-cheap cash generators that have a high chance of returning to their former glory. As the firm cleans up the balance sheet while finding a way forward in spite of industry uncertainties, I do think that investors looking to punch a ticket will be in some great company.
