As a reliable Dividend Aristocrat and the largest telecom company by market cap, BCE (TSX:BCE) is a good buy at its discounted state. The primary reason is the yield that has climbed up to an attractive level thanks to the discount, but there are other reasons.
The company
BCE is one of the three telecom giants in Canada that collectively control the bulk of the market. It doesn’t make the competition less fierce — just less unpredictable and easier to plan for.
In addition to being the largest telecom company by market cap, BCE is also the largest communications company by customer count, with over 22 million customers connected to the company for at least one of its services. Its wireless network footprint covers almost 99% of the Canadian population.
It can’t claim the title of the top 5G stock in the country, but it has enough market penetration and the potential to leverage its extensive footprint for further growth in this area. This reach also gives it an edge when it comes to the Internet of Things (IoT), which has the potential to become the next big thing for the telecom companies in Canada.
The stock and dividends
Even though the BCE stock has been struggling for the past five years, it’s not a weak pick per se. The stock experienced a decent bull run starting from the Great Recession to 2020, followed by another bullish phase with the 2020 crash in between. The stock is going through a correction that has pushed it down 27% from its 2022 peak and 18% in 2023 alone.
The discount has positively impacted the valuation of the company, though not by a significant enough margin. It has, however, pushed the yield up to a very attractive number of 7.2%, which is quite high for an established aristocrat.
At this rate, you can start a passive income of about $60 a month with $10,000 invested in the company. Considering its past performance, there is also a decent chance of the stock growing at a good pace if the market experiences a long-term bullish phase. This can significantly improve the overall returns you will get from this stock.
Foolish takeaway
BCE is among the best blue-chip stocks in Canada for dividends. The yield is incredibly attractive, and the stellar dividend history and healthy financials also tick the sustainability box.
BCE’s solid third-quarter results are one of the catalysts behind its recent recovery, and if it rides this momentum to a full recovery, the dividend yield will not remain as attractive, so locking in this high yield now would be a good idea.
