BCE is not perfect, and has some issues to deal with (lowering costs, high capex) but we would have few if any concerns on its preferred shares. It has a substantial asset base, and pays $3.7B annually in common share dividends. Assets could be sold and/or the common dividend stopped, if needed, to protect the preferred shares. Cash flow runs at more than $7B annually. So we would not be concerned on dividend sustainability here. For capital appreciation, two things are really needed. BCE needs to improve its fundamental performance, with its recent cost-cutting programs bearing fruit. And, interest rates in Canada need to continue to tick down, which should improve sentiment and towards the preferred share sector which could improve valuations. Both we think are likely, over time. Note however that this is a floating rate preferred, and dividend are adjusted based on current Canada yields.
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