Canadian blue-chip stocks might not be attractive for investors seeking substantial returns in the short run. Typically, these stocks offer slow but sure long-term returns through capital gains and reliable dividend income. However, there are always times when the market opens up opportunities, such equity securities becoming more attractive in the near term.
BCE (TSX:BCE), the $48.22 billion market capitalization giant in the Canadian telecom space, is one such stock that’s an opportunity you do not want to miss right now. Before we get into why exactly it’s a great holding to consider for your self-directed portfolio, it’s important to understand what has happened.
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A drop in earnings
Due to several factors plaguing the entire global and Canadian economy, BCE stock did not enjoy one of its strongest performances in recent years. In fiscal 2023, BCE stock reported a drop in its earnings per share (EPS) by a substantial 21%. Despite being a solid company with services that are essential, the company saw a significant decline that was unavoidable.
Since its latest quarterly earnings report, BCE stock has slipped closer and closer to its 52-week low. As of this writing, BCE stock trades for $52.83 per share. Down by almost 20% from its May 2023 high, it might seem like a risky investment to consider. However, the decline in its share prices might just be the very reason it makes for an excellent addition to investor portfolios. Here’s a look at why that is.
High-yielding dividends
At current levels, BCE stock pays its shareholders their dividends at a juicy 7.3% dividend yield. Historically, the stock has maintained a 4-5% dividend yield, which is still attractive. However, the recent downturn in its share prices has inflated its dividends to deliver a greater bargain for income-seeking investors. Typically, you get these kinds of dividend yields with much riskier companies. BCE stock is far from being a risky investment to consider.
Reliable track record
BCE has a solid track record when it comes to several things. The telecom giant has paid its shareholders their dividends for the last 40 years without fail. Out of the four decades, the last 15 years have seen its dividends grow by around 5%. It means that the company has not just maintained its payouts, it has increased how much it pays to its investors consistently for a decade and a half.
Despite the economic challenges it has faced with the broader economy, BCE has a solid balance sheet. Boasting $620 million in cash and over $4 billion of available liquidity, BCE stock has ample room to continue paying and growing its dividends without worrying investors.
Foolish takeaway
Despite macroeconomic jitters causing some hiccups in its share prices in recent weeks, BCE stock looks as solid an investment as any blue-chip stock. It is the leading provider of 5G in the country, with plenty of room to deliver substantial long-term growth. The company remains committed to providing better, faster, and consistently improving telecom services to Canadians to maintain its lead. Shoring up on your holdings might be an excellent way to lock in higher-than-usual yielding dividends and capture capital gains for long-term wealth growth.
