It was invevitable. Bell Canada (BCE) was paying a massive dividend with money it did not produce from operations. Paying an unsupported dividend, and most would say irresponsible dividend, was not good for the balance sheet. It was not good for investors either. As many of us had begged – do the responsible thing and cut the dividend. Well this week they did, as BCE cut the dividend by 56%. The markets gave the move an intitial cheer sending the stock up almost 8% from the time of announcement. Did we just ring the bell for the bottom for Canadian Telco stocks? It might be ‘good news’ that Bell finally cuts its dividend. Plus, stay on the line for the Sunday Reads.
BCE (Bell Canada) announced this week that it would cut its quarterly dividend payment by 56%, reducing it from $0.9975 per share to $0.4375 per share. They also suspended their DRIP discount. Here’s the wee stock price bump this week …
Thanks for nothing
But the near term wealth destruction has been incredible. The stock price fell by over 60% from its early 2022 peak. Over the last 10 years, with dividend reinvestment, the stock is essentially flat.
It’s the same story for Rogers, while Telus has provided a modest return. For the table below, the full period is 10 years, to the end of April 2025.
Readers might remember that I sold half of my Bell stock in early 2024. I went to to sell the rest and half of my position in Telus. The sector faced the double whammy of higher rates (leading to higher borrowing costs) and an attack by regulators. We can now add in slowed immigration in Canada and perhaps general economic decline (even recession) risks.
In my wife’s account we hold Telus and Quebecor, that turned out to be a nice and obvious hedge due to the QBR-B-T owning the Freedom Mobile discount brand. Quebecor has been on a nice run. Telus announced an increase in profits and raised its dividend by 3.5%.
Here’s the Quebecor performance, not including dividends.
I have also shaded in some HUTS-T that invests in the broader Canadian utilities space, including pipelines and traditional utilities. That ETF applies 25% leverage.
The inflation answer – the hedge call
Of course, Cut The Crap Investing had you covered with the inflation-friendly assets such as Canadian oil stocks that went up over 450% in quick order. From October of 2020 …
Looking to the Canadian energy sector.
That’s a key component of covering the risk with an all-weather portfolio. Inflation hurts bonds and high yield assets, other assets such as oil and gas stocks and commodities pick up the slack. I often mentioned the Purpose Real Asset ETF (PRA-T) as a wonderful one-stop inflation fighter. Returns, not including dividends …
When rate relief said hello
When the Bank of Canada said “I’ll hold” back in the Fall of 2023, I started to shade more to bond markets to balance out cash and ultra-short bonds. The end of rate hikes that eventually led to rate cuts turned into good news for the bond markets and the high dividend space. It was the near term bottom for VDY-T and utilities ZUT-T.
Investing in Canadian utilities stocks and ETFs
Telco is essentially a no growth sector, but still with the potential to be rich in free cash flow. They can milk the Canadian consumer. Perhaps the best we can hope for is a very slow growth investment that returns to its solid lower volatility utility-like ways. For a few weeks I have suggested that the bottom might be in, or near. But only time will tell.
I like managing the risk by investing in the broader utilities space. I do like defensive sectors for retirement funding. They work in concert with bonds, cash and gold.
That’s a key theme in Retirement Club for Canadians.
On the defensive front Canadian consumer staples (XST-T) have been ringing up the market-beating returns.
Canadian financials near record high
And here’s a bit of a shocker. As Trump threatens to ruin Canada (economically) our financials index (XFN-T) is within a whisker of an all-time high.
And of course, given the financial concentration, the banks and other financials are helping the Canadian market move near all-time highs. The stock markets are not buying the tariff war and Canadian economic destruction “stuff”. And part of this move is due to the fact that the Canadian stock market is not the Canadian economy. TSX 60 constituents generate about half of their revenues and earnings from the U.S. and other international markets.
Ignore everything with an asset allocation ETF
Of course, you can choose a managed global asset allocation ETF.
In the above chart, we see iShares balanced growth portfolio XGRO-T deliver over 67% over the last 5 years. That’s a one-fund, one ticker solution.
Check out last week’s Sunday Reads – A look at the Canadian asset allocation ETFs.
You can also build your own core ETF Portfolio.
If you want advice, financial planning and low-fee ETF Portfolio check out Justwealth, Canada’s top Robo Advisor. You can have it all with very sensible fees.
More Sunday Reads
At Findependence Hub, retirement confidence is crashing. More Canadians might be looking to HELOCs and reverse mortgages to fund retirement.
That can be a very solid idea, if used sensibly and in very modest amounts. Of course, it’s tax free income. That topic will be explored in more detail in Retirement Club.
Dividend Hawk eyes his dividends and company news for his portfolio.
At Stocktrades Dan notes that the Canadian banks are built for steady long-term growth.
Related read: Investing in Canadian banks and ETFs.
Here’s a good share from Marc at Loonies and Sense. Canadians are taking advantage of the greatest wealth building opportunity available.
And that said, some folks go the real estate route.
There’s more than one path to financial independence.
Isabelnet shows that buybacks are strong at American firms. As they retire shares, your share of the company, and company profits increases.
You can travel to Taiwan with Bob from Tawcan.
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Like you, I also sold out of my Bell position last year. My first big cut from my portfolio since I began investing. The warnings were there and I tried to illustrate that in my own blog: https://divistockchronicles.substack.com/p/bce-inc-oy-vey-fy24
I do, however, still own my Telus shares.
It seems that every segment of the economy goes up and down over time (telecom, gold, real estate, financials …) and it is why indexing makes sense (especially for the greater portion of your portfolio).
My two cents …
I index globally in our now small registered accounts. ZBAL and XDG.
Our first non-registered account bought a large chunk of our wee house in 1999. Just a lucky streak in a bull market with a few multi-baggers. After we paid off our mortgage in 2003, we started building our second non-registered account. This time all-Canadian dividend payers. I learned my lesson as far as technology stocks back in the early 2000’s. Nortel and JDS Uniphase faded to nothing and Research In Motion, now Blackberry (unless you were a great market timer, I’m not) was another disaster.
There’s lot’s of things I can’t do as an investor, and one of them is trying to evade dividend cuts. In now twenty two years of running this portfolio I could never tell the difference from the empty threats of a cut to the real deal. Always after a cut I would sell. Sometimes it was a good idea, sometimes not. This time round, I’m staying with BCE in the portfolio. It now only represents around 2% allocation in this portfolio and we still get our dividend, just a smaller amount. No predictions but BCE has the assets, so all it needs is a good management team to turn things around. Meanwhile, so far our Telus, Quebecor and Cogeco Inc. are all doing just fine, despite trying to thrive in lousy circumstances. All three have given us a welcome dividend increase over the last few months.
Yes, as mentioned above our Canadian consumer staples have been doing well. Also financials, pipelines and power utilities.
Along with communications, consumer discretionary and industrials, maybe not quite so well. These are the laggards I usually add new cash from mostly dividends to. Just started adding to a new materials sector, so even in retirement, always building.
We just do slow compounding over time. It’s all there in the now century old book, “The Richest Man In Babylon”. Although my book was bought in the early 80’s, I’ve seen free pdf copies on the internet.