Q: No-one who ever bought BCE (including me) expected a >9% yield. If the fear is due to potential dividend cut and/or lack of growth, wouldn’t it be better for the company to just cut the dividend by 50% now and move on?
A 4.6% yield is still decent and maybe investors will actually make more in growth than they would have in income.
A 4.6% yield is still decent and maybe investors will actually make more in growth than they would have in income.
5i Research Answer:
In theory, this can work. But if the stock declines on the cut, the company's cost of capital goes up. But sometimes companies do let the market dictate policy. But considering its dividend history we do not think management would make such a move lightly, without careful consideration of the consequences. We are of the view it will not cut unless it HAS to. Its last communication was simply slower dividend growth.