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This telecom dividend giant is overlooked by everyone

Mart Poom
21. 6. 2023
4 min read

Canadian stocks are very popular among investors. This is because this economy is famous for its stability and focus on dividends. Even more interesting for investors may be the fact that relatively unknown stocks can be found here. And we'll take a look at one such stock here.

Don't take my word for it. With a market capitalization of over $40+0.0% billion, $BCE+0.0% is certainly not a small and unknown company. On the other hand, it remains, at least in this country, relatively overshadowed by its competitors - $VZ+0.0% and $T+0.0%.

Sector

Before moving on to the company itself, let's take a look at the telecommunications sector, which is often extremely attractive to investors. But it has its risks. This is for several reasons.

Large capital expenditures - Telecom companies must continually invest large sums in building and upgrading networks to keep up with new technologies. This leads to a high debt burden and dependence on debt financing.

Regulation - The telecom market is heavily regulated by the government, which affects pricing, competition and companies' obligations. Regulation is constantly evolving.

Rapid technological advancement - Telecom companies need to constantly upgrade and expand their networks to keep up with advancements - e.g. currently moving to 5G. This requires heavy investment.

Competitive environment - The telecom market is typically an oligopoly with a few dominant players, which pushes margins low and serves as a hedge against high prices. Mostly.

Dependence on suppliers - Telecom firms are dependent on suppliers of hardware and network technology. Problems at suppliers can affect their own operations.

Cyclicality - Downturns in economic activity usually lead to lower demand for telecom services, which affects revenues and profits.

$BCE+0.0%

BCE is a Canadian telecommunications giant with a long history. The company has been in business since 1880 and in that time has grown to become the largest provider of telecommunications services in Canada. BCE provides services such as landlines, internet, television and cellular to millions of customers across Canada.

BCE

BCE Inc.

BCE
$37.60 -$0.01 -0.03%
1 Day
+0%
5 Days
+1.29%
1 Month
-8.62%
6 Months
-7.25%
YTD
-6.86%
1 Year
-16.27%
5 Years
-14.97%
Max.
+309.25%

Due to its size and market dominance, BCE has a stable and reliable business model. The company's revenues and profits have grown by several percent per year over the long term, or have remained relatively stable. In addition, BCE has a strong brand and a proven management team. All of this is reflected in a long-term stable dividend history. BCE has increased its dividend every year since 1976 and now offers shareholders a dividend yield of around 4.66%.

Revenue BCE

Going forward, BCE's growth should be supported by investments in the expansion of fiber optic networks for high-speed internet and 5G mobile networks. This should bring faster internet as well as better coverage in remote areas. On the other hand, BCE is facing increasing competition from alternative providers and technological changes in the industry in general. Another risk is the potential slowdown in the Canadian economy, which would negatively affect household spending on telecommunications services.

BCE shares are particularly suitable for conservative investors looking for a stable and reliable dividend stock. The potential for high growth in shareholder value is not high, but on the other hand, the risks are not high either due to the company's strong market position and proven model. For the investor, a stable and growing dividend that can generate a solid yield even with minimal growth in the stock itself is particularly attractive.

A long-term growing dividend is attractive to investors.

BCE is Canada's largest telecommunications company ahead of companies like Rogers Communications and Shaw Communications. The company was formed nearly 40 years ago today by the merger of Bell Canada, Northern Telecom and other affiliates.

BCE differs from its competitors in that it has a significant media division with channels including CTV, V, TSN and RDS, in addition to traditional broadband, wireless and fixed-line services . It also licenses US content such as HBO, Showtime and Starz.

BCE recently reported strong fourth quarter results with 330k activations, including 123k mobile subscribers, 104k mobile devices and 63/40k internet subscribers.

EBITDA $BCE+0.0%

BCE's fibre network covers three-quarters of Canadians. Management highlighted the company's outlook for fibre and 5G - they will invest CAD 4.8 billion by 2023.

Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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