BCE Stock Analysis: Why We’re Avoiding BCE and TELUS in 2024

TL;DR:

• BCE’s earnings have slipped below its dividend, creating balance sheet pressure.
• TELUS faces similar issues with an uncovered dividend and regulatory headwinds.
• We recommend avoiding both stocks until they hit key price break points.

📺 Watch the full video & analysis here

A Look Back: BCE’s 2007 Leveraged Buyout Drama

BCE is one of Canada’s most widely held stocks, but its history offers some clear lessons.
In 2007, the Ontario Teachers’ Pension Fund proposed a leveraged buyout at $42.75 per share. With BCE stock trading around $38–$39, investors saw an easy 8–10% gain and rushed to buy in.

The problem? A potential downgrade to BCE’s AAA credit rating. Our analysis at Strategic Analysis Corporation showed the risks clearly, and when KPMG rejected the deal, panic selling sent the stock plunging back to its normal price-to-book value of 1.0.

At that point, BCE was a screaming buy, and it tripled in value over the next several years.

From Peaks to Pressure: The Decline of BCE’s Fundamentals

After reaching its fair market value in the low $60s, BCE saw multiple rebounds and corrections. However, two major headwinds emerged:

1. Regulatory Pressure – The CRTC required BCE and TELUS to share their platforms with smaller competitors, pressuring returns on equity (ROE).
2. Dividend Coverage Issues – Earnings slipped below the dividend payout, forcing the company to fund distributions from the balance sheet.

As BCE’s fair market value declined, so did the stock’s attractiveness. A dividend cut helped slightly, but shares are now trading between their growth price ($36) and high conservation price ($26).

We avoid buying stocks between break points, so BCE is currently off our buy list.

TELUS: Same Story, Same Risks

Some investors might think switching from BCE to TELUS could be a solution. But TELUS isn’t in much better shape:

• Dividend Yield: 7.6%
• Earnings: $1.08 per share
• Dividend: $1.66 per share (not covered)
• Balance Sheet: Slipping due to the same CRTC-driven pressures

With the dividend at risk and shares already trading at fair market value, TELUS offers limited upside.

Strategic Takeaway

Both BCE and TELUS are facing the same structural challenges: regulatory pressure, uncovered dividends, and declining balance sheets. Until prices hit attractive break points or fundamentals improve, these stocks remain “no touch” for us.

📺 Watch Ross Healy’s full video breakdown here

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