BCE's dividend yield is close to 9 per cent: Buy, hold or run for the hills?

Off the top, I should mention that I own some BCE BCE-T shares. Count me among the slack-jawed multitude watching this battleship of a stock get decimated.

BCE Inc. has not been a stock to own for capital gains in recent years, but you could count on a generous dividend that got bumped up a bit every year. The dividend’s still growing, but BCE’s share price has fallen by 14 per cent this year and 28 per cent in the past 12 months. The dividend yield, long in the 5- to 6-per-cent range, now approaches 9 per cent. If high yields are a warning, this one’s an air raid siren dialled up to 11.

Management at BCE seems sanguine about the stock. As reported by The Globe and Mail’s David Milstead, the company has paid out millions in performance bonuses to top executives. Now, let’s round up some other opinions about BCE using resources available through resources that digital brokers offer their clients.

Investor clinic: BCE’s stock has fallen and it can’t get up. Here’s why

Morningstar, the independent investment analysis company, rated BCE four out of five stars in a recent quantitative equity research report that said the stock was trading at a 19 per cent discount based on a share price of $44.94. This puts fair value at $55.39.

A separate Morningstar equity analyst report dated April 3 slapped a five-star rating on BCE with a fair value estimate of $60. A headline in the report: Rogers, Telus, and BCE: The Selloff is Overdone; We Favor Rogers, but All Three Look Like Bargains.

From there, optimism drains away. LSEG Data & Analytics scored BCE a six out of 10 based on factors such as earnings, relative valuation, risk and price momentum. Another provider of stock analysis, CFRA, rated BCE three stars, or a “hold” with medium risk. “Hold” was also the rating applied by Argus Research, which has a target price for BCE that is little above the current level.

Most brokers and investing websites offer a consensus of analyst ratings for a stock. The consensus rating for BCE is a “hold”, based on 83 per cent of analysts covering the stock saying hold and 17 per cent saying “buy.” None have a “sell” on the stock.

One of the messages to be drawn from the high yield for BCE shares is that investors are concerned about the sustainability of the company’s dividend policy. Morningstar’s analyst report noted the company has raised its dividend by at least 3 per cent for over 15 straight years. The report said BCE would be better served by getting away from automatic annual dividend increases and using excess cash for share repurchases.