Q: Do you like this security for a 10% forward yield and eligible for dividend tax credit? I understand it has recently reset to pay $0.15 per month ($1.80 annually). Only in February 2022 it was paying $.05 per month explained by the rapid increase in BOC rates. Is this a financial problem for BCE? I believe it is redeemable by BCE at $25.
5i Research Answer:
Yes we would be quite comfortable here. BCE is a solid credit, and the preferreds are now floating rate preferreds. This is why the rate has gone up, but of course if rates decline the rate can be adjusted lower. But BCE generated $7B in cash flow last year, and can always stop its common dividends (more than $3B) if it needs to protect the dividends of its preferreds. We would not perceive problems here.