Are BCE shares worthy of a place in your high-yield portfolio?

BCE Inc. (ECB) in Verdun, Canada, is Canada’s largest communications company, offering modern Bell wireless broadband, Internet, television, media and business communications services. It operates through three segments: Bell Wireless; Wired Bell; and Bell Media.

While BCE’s four-year average dividend yield is 5.1%, its current dividend translates to a yield of 5.4%. It declared a quarterly dividend of $0.72 per share on May 05, 2022, to be paid on July 15, 2022. The stock price has gained 12.1% over the past year and 3.4% since the start of the year to close yesterday’s trading session at $53.79. .

However, the stock is down 5.8% over the past month, mostly due to a broader market downtrend. Additionally, CFO Glen LeBlanc said the company is witnessing inflationary pressures — with gas prices alone likely to be around $15-20 million this year — but realizing always cost savings with wireline OPEX. The company is also experiencing pandemic and supply chain challenges, including a 28.6% reduction in product revenue due to a lack of equipment availability in its wireline business division.

Here’s what could shape BCE’s performance in the near term:

Mixed profitability

12.11% ECB over the last 12 months net profit margin is 122.2% above the industry average of 5.5%. Its trailing 12-month operating cash of $6.33 billion is 2134.2% higher than the industry average of $283.45 million. However, its gross profit margin of 43% over the last 12 months is 15.5% below the industry average of 50.9%. In addition, its 12-month leveraged FCF margin and asset turnover rate are 79.6% and 22.1% lower than their respective industry averages.

Extended valuation

In non-GAAP forward P/E terms, the stock is currently trading at 20.63x, 11.3% higher than the industry average of 18.54x. Additionally, its EV/Forward Sales of 3.97x is 85.7% above the industry average of 2.14x. Additionally, BCE’s 2.56x futures price/sales is 72.2% above the industry average of 1.49x.

The price target indicates a potential decline

The 12-month median price target of CAD 68.57 indicates a Potential downside of 0.68%. Price targets range from a minimum of CAD 63.00 to a maximum of CAD 72.00.

POWR ratings reflect uncertainty

BCE has an overall C rating, which equates to a neutral rating in our own POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.

Our proprietary scoring system also rates each stock against eight distinct categories. BCE has a D rating for value and a C for quality. It is all the higher as the valuation of the industry is in line with the Value rating. The company’s mixed profitability is in line with the Quality rating.

Among the 47 A-rated stocks Telecom – Abroad sector, BCE ranks 42nd.

Beyond what I’ve stated above, you can check out the ECB ratings for growth, momentum, stability and sentiment here.

Conclusion

As BCE invests heavily in infrastructure to meet increased data needs as consumers migrate to 5G and fiber networks, rising inflation and soaring costs could be a concern for the near-term outlook. of the company. Additionally, based on the consensus price target, we think investors should hold off on buying back his shares.

How does BCE Inc. (BCE) compare to its peers?

While BCE has an overall rating of C, one might want to consider its industry peers, Telekom Austria AG (TKAGY), KT Corporation (kt) and MTN Group Limited (MTNOY) that have an overall rating of A (Strong Buy).


Shares of BCE were trading at $53.76 a share on Friday morning, down $0.03 (-0.06%). Year-to-date, BCE has gained 4.67%, versus a -13.25% rise in the benchmark S&P 500 over the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college, she majored in finance and is currently pursuing the CFA program and is a Level II candidate. After…

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