Q: Good afternoon,
I know there has been much angst here with Telus. And your responses in recent months have been very well thought out and helpful (rates; competitive/regulatory environment). I have a 2% weight in BCE, 1% weight in T. So not massive by any means. But the slow steady drip downwards in price is getting frustrating, and now seeing the price today lower than where it was in the depths of COVID in March 2020 is concerning. At what point do I just take the 1% in T and add to BCE?
I know there has been much angst here with Telus. And your responses in recent months have been very well thought out and helpful (rates; competitive/regulatory environment). I have a 2% weight in BCE, 1% weight in T. So not massive by any means. But the slow steady drip downwards in price is getting frustrating, and now seeing the price today lower than where it was in the depths of COVID in March 2020 is concerning. At what point do I just take the 1% in T and add to BCE?
5i Research Answer:
BCE pays a higher yield than T (9.0% vs. 7.3%, respectively), and BCE also trades at a cheaper valuation (14.8X vs. 20.5X, respectively). BCE is a larger name than T, but it is expected to grow sales at a more modest pace next year. BCE has demonstrated a stronger margin profile than T, and for that reason, we feel it can be the 'safer' choice between the two. Telus is considered to have potential for a better rebound in a recovery situation, but is associated with higher risk. We perceive BCE as the safer choice overall, given its cheaper valuation and stability. We would prefer to own both for diversification, but if an investor is looking to consolidate, we would prefer to consolidate T to BCE.