Not all TSX stocks have been participating in the glorious rally toward new heights. Indeed, some of the laggards do not seem to have gotten the memo that it’s time for a bounce-back. As industry-specific pressures continue to weigh, the following plays to greater depths; even as the TSX Index looks to continue its ascent, investors seeking deep value should look to some of the “broken” stocks that still have long-term theses that are anything but!
Without further ado, let’s have a look at one blue chip that has been nosediving of late. And though shares seem to be falling knives that could hurt you if you try to catch them, I think that they may actually be less risky than most other momentum plays in this market, specifically those in the tech sector that have doubled up in the first quarter of the year.
Undoubtedly, we all want to be on the receiving end of such sudden skyward spikes. However, it can be a dangerous game to scoop a parabolic stock a rally has already enriched those who bought just a few months earlier. Showing up late to a party entails its own slate of risks!
In any case, what seems like a sure shot at glorious returns may actually accompany higher stakes than the stocks that almost everybody else has thrown the towel in on!
BCE
First, we have Canadian telecom titan BCE (TSX:BCE), a stock that has broken many investors’ hearts over the past two years. Year to date, BCE stock has been a drag on the overall market, now off nearly 15% in just the first quarter of the year.
Do you dare to catch a bottom in the $42 billion dividend titan? You could be waiting a long time for a sustained relief rally. Not only that, but you may have to deal with further downside risk as investors run out of things to be remotely positive about.
The dividend, once thought of as untouchable, now seems to be on some wobbly legs. The dividend yield sits at 8.6%. While it’s not destined for the chopping block, investors should not expect such a massive payout to be safe and sound, especially if BCE stock has further room to fall and the yield more room to swell. Though those who catch the bottom could do extraordinarily well, I’m just not sure if we’re quite there yet.
As the yield looks to test 9% next, though, I’d prepare to be a net buyer, perhaps starting with a partial position today while the stock’s close to multi-year depths. BCE may not be the reliable dividend darling it used to be, but it still has plenty of “moaty” wireless infrastructure assets. And I don’t think you can ignore the efficiency-driving moves the firm has made to shore up liquidity.
There’s not a heck of a lot in the way of catalysts for the ailing telecom titan. However, the modest valuation and intriguing dividend are worth backing as long as you’re not easily rattled by elevated levels of volatility.
