TD updateVince Valentini changed opinion . couple months ago he raised doubt
about dividend sustainability
Now
TD Investment Conclusion
We believe the dividend is safe and the probability of another 5% increase in February is very high, which puts the prospective yield at 7.4%. We are not quite at the forecasted return needed for a Buy rating (typically we need to see over 10% even for a large cap, low risk name), but we are getting close. BCE is a solid name for investors looking for income in an environment where central banks start easing and bond yields are declining. It is also a defensive name that should see minimal impact if a harder landing scenario unfolds.
Media advertising is cyclical, but we have already been in an advertising recession for over a year (exacerbated by content shortages owing to labour disruptions in Hollywood) so Y/Y comps in that segment should be easy even if the broader economy enters recession. Wireless competition is vibrant (latest note on Black Friday promotions is here: LINK) but not disruptive, in our view, and subscriber/volume growth remains robust as an offset to sluggish ARPU trends. Regulatory risk in 2024 is low, in our view. Consumers are already benefiting from healthy competition and thus lower per unit pricing in both wireless and Internet, so there is no reason for the CRTC or the government to make meaningful changes. The recent FTTH decision has proved to investors that the CRTC has no intention of deliberately disrupting the industry with wholesale access rates that are below cost for the network owners (albeit we agree with BCE that some aspects of the decision were strange – see our note here: