The latest decline in the market has not spared telecom stock prices. It’s challenging to find a reason to be optimistic about anything when there is so much worry about rate increases and the inevitable crisis. Despite the possibility that a recession would make it more difficult for telecom stocks to collect regular bill payments, I believe that recent share price declines and elevated dividend yields have more than offset any future risks from a possible recession.
The telecom industries are long-term economic profit defenders with vast moats. Canadian telecommunications have more than enough pricing power to pass these costs to consumers. However, rising interest rates are bad for capital-intensive businesses like the telecoms (many still need to spend billions on 5G wireless infrastructure over the following years). In an oligopoly, there is power in being a member.
The greatest dividend yield among Canadian telecom bets is offered by BCE shares, a telecom juggernaut with a huge dividend yield of 6.4%. BCE might not be the best option for young investors looking to maximize overall returns over the long term due to its restricted growth prospects and low-growing media division. It’s challenging to beat BCE for investors looking for a substantial income that is secure and increasing. The payout is stunning, with inflation at or near the 7% level.
Currently trading at a new 52-week low of $57 and change per share, BCE is in a bear market collapse. Indeed, a significant contributing component is the general market’s downturn. Bell Canada has been named PCMag’s fastest mobile network for three years, and I believe BCE is a titan that Canadians can count on during trying times.
BCE stock seems like a good investment at 18.4 times the trailing price-to-earnings (P/E) ratio. Recession dread is heavily ingrained. I would argue that the slide is an opportunity for anyone looking for passive income to lock in that sweet +6% yield, given the size of the most recent bear market decline.
A regional telco, Quebecor aims to become the fourth major Canadian carrier and might significantly impact the national telecom industry. It’s challenging to be the number-four player when the Big Three heavyweights flex their muscles, as we saw with Freedom Mobile. Nevertheless, I believe that the market is undervaluing the qualities of CEO Pierre Peladeau. In my opinion, the Big Three telcos should be concerned about losing market share rather than Quebecor, which has thrived in the Quebec market and might do the same in other provinces.
The stock price of QBR.B is currently down more than 30% from its high. The 9.9 times trailing P/E looks too cheap, but the 4.9% dividend yield is abundant.
There are enormous profits to be earned if things work out, just like betting on any underdog. I believe there are numerous reasons to give the $5.7 billion telecom stock the benefit of the doubt if you are a long-term investor.