Q: What the future prospects for BCE and T? Collectively both of these holdings represent about 3.5% of my holdings and currently under water. I am contemplating selling T and buying BCE. Once all the pros and cons for both companies are weighed, is it a reasonable positive change?
5i Research Answer:
BCE offers a higher yield than T at 8.9% vs. 6.8%, respectively, and BCE also trades at a cheaper valuation (14.8X forward earnings vs. 21.6X, respectively). BCE is a larger company than T, but it is expected to grow sales at a more modest pace next year. BCE has demonstrated a stronger margin profile than T, and for that reason, we feel it can be the 'safer' choice between the two. Telus is considered to have potential for a better rebound in a recovery but is associated with higher risk. We perceive BCE as a safer choice overall, given its cheaper valuation and stability. We like BCE most, but we would still prefer to own both for diversification rather than bet on one.