Things have gotten a lot worse for shares of high-yielding telecom titan BCE (TSX:BCE) in the past few months and quarters. Undoubtedly, the industry is in a really bad spot right now, giving management limited room to navigate what looks to be a hurricane environment.
While there are less painful ways to go for mega-sized yields, I still think it’s too soon in the game to give up on the former dividend darling, especially as the last wave of investors and analysts look to give up on the stock. Indeed, it’s a name that demands patience as it looks to turn the ship around en route to positive earnings growth.
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BCE cut jobs: Could the dividend be next?
And while the recent waves of budget cuts (the company is offering severance packages to around 1,200 unionized Canadian workers) seem to suggest there’s less in the way of relief in sight, I think that the name looks quite intriguing if you’re a younger investor who’s looking for significant bounce-back potential.
Sure, BCE stock may have been a favourite of passive income-seeking retirees in the past. But amid its slump, I view the telecom firm as more of a deep value option for investors who understand the risks of catching falling knives or bottom fishing in the TSX Index’s value waters.
There’s no sugar-coating that 54% stock drop — it’s been a vicious descent for many investors. And while the 11.7% dividend yield is towering, I do not expect it’ll stay at these heights for all too long. Many analysts covering the telecom also see the dividend as just waiting to be cut. I’m inclined to agree with the analysts who think it’s better to rip the band-aid off sooner rather than later to help shore up liquidity and get the firm back on the right track a bit sooner.
Not much to look forward to in 2025
Of course, there’s much work to do as BCE looks to enter another tough year for the telecom firms. Indeed, there may or may not be relief up ahead. Either way, it seems like the stock is already priced with a lack of catalysts in mind. If a stock is so cheap, even a modest better-than-feared quarterly number may be enough to help BCE gain a bit of ground again.
Chief Executive Officer Mirko Bibic may be keeping his chin up for 2025. But investors don’t share his optimism, especially given the recent stock action, which suggests a dividend reduction is imminent. The good news is that once BCE decides to cut the hefty payout, the stock may be less rattled than one would think.
Sure, BCE stock looks untimely here, but that’s exactly why I’d be inclined to step in as a buyer. A true contrarian with a long-term horizon may have the risk/reward scenario on their side if the company can move forward with moves to increase efficiencies.
The bottom line
While I would be cautious with the name, perhaps dollar-cost averaging into shares through the year to better cope with volatility, I’d not dare bet against the firm at these depths. Though only time will tell, I think most of the damage has been done. The big question is if BCE has any surprises up its sleeve as it looks to better compete with its Big Three Canadian telecom rivals.
All considered, I view BCE as a hold for most but a buy for disciplined deep-value investors who do not fear immense volatility.
