Before you reach out to that rotten egg to hurl in my direction for asking yet another question on this stinker of a company (!) let me say a few words in my defense! I spent the last 39 mins or so going through all the recent questions on BCE using your symbol search! I couldn't find the answer to the question that I am going to ask now!
Hypothetically IF BCE were to cut it's dividend by 25% ( currently at 11.58%) then what will be the stock price post cut? It is 34+/-.
However if the stock price drops a lot, wouldn't it make the dividend go up? I thought there's an inverse relationship between the stock price and dividend, no?
In any case, I know you are not too keen in speculating about price targets. Based on your experience with large companies that cut their dividend, what's your price target for BCE assuming it cuts it's dividend?
Many thanks.
The actual dividend remains the same, but the yield does change with stock price changes. So if a stock price rises, the yield declines. If the stock falls, yield goes up. Six months or so ago, we would have thought that a dividend cut at BCE would have led to a rally in the shares. Now we are less sure, because it has held this stance and very high yield, there is a likelihood that the investor audience has had time to turnover, and many of the current holders are now holding it for the very high yield (opposed to maybe a growth/yield combo). So now, we might lean more toward a dividend cut actually leading to further share weakness, because most holders now like it for the outsized yield and management has also now said they do not plan on cutting. If they cut now the management team might see a credibility issue, which could hurt sentiment and valuation somewhat. We think there might be a $2 short term decline on a 25% cut.