Passive Income: 2 Dividend Heavyweights to Watch in January

The dividend heavyweights sport pretty towering yields after a year that saw rates heat up to levels not seen in a long time. With rates ready to retreat in 2024, the most yield-heavy of dividend stocks may be ready to make an upward move higher. Indeed, as rates fall, we could see big, high-quality yields become scarce again. Remember the days when 3% yields on dividend stocks were the norm?

When you have depressed rates and tame inflation, such a scenario is definitely possible. These days, many passive-income investors have been spoiled with rates at or even above the 5% level.

Indeed, we’ve all had to deal with a considerable amount of market volatility and perhaps even some capital losses. That said, if you hold and do not sell on weakness, I view this somewhat temporary period of sky-high rates as a magnificent opportunity for the income-focused investor.

Undoubtedly, a trio (or more) worth of rate cuts may be baked into markets for the year. Though we could be dealt fewer, I believe that rates are bound to be much lower in two or three years from now. And with that, the swollen yields on your favourite income stocks may be poised to yield less than they are now. So, if you’re interested in hanging onto a dividend heavyweight for the long haul, consider the following top telecom stocks while rates are still elevated.

BCE

BCE (TSX:BCE) stock used to be a dividend darling that yielded a tad more than the broader batch of Canadian dividend plays. Nowadays, shares have been pretty painful to hold, especially for risk-averse retirees. The stock’s choppy ride may not be over, with violent fluctuations occurring in the final month of 2023.

At around $54 and change, BCE stock stands out as a pretty enticing dividend play while its yield is hovering just over the 7% level. Indeed, BCE stock tends to yield closer to 5% in normalized conditions. These days, you’re getting a supersized dividend yield. And as rates fall and Canada returns to robust economic growth, look for BCE to be a place to have your cake (a high dividend yield) and eat it, too (relief rally gains).

At 22.4 times trailing price to earnings, I view BCE stock as a fair way to meet your passive-income needs.

Rogers Communications

Rogers Communications (TSX:RCI.B) is another telecom stock that’s dealing with industry headwinds similar to its heavyweight rival BCE. Rogers stock doesn’t get as much respect as it deserves due to its smaller market cap ($33.3 billion vs. BCE’s nearly $50 billion) and its much smaller dividend yield (3.2% at writing). With Shaw Communications’s assets aboard, I view Rogers’s wide economic moat as much wider.

With prices reportedly going up for non-contract customers, the telecoms are bound to face negative headlines again. Regardless, there just isn’t that level of competition in the Canadian telecom scene to cause any severe negative consequences for Rogers or any other telecom. Sure, regulatory hurdles could present themselves in the future, but I don’t expect them to challenge the firm’s dominance.