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As I write this near the end of Tuesday’s trading, Barchart.com’s data for 52-week highs and lows says there are124 highs on the NYSE today and 78 on the Nasdaq, along with 33 lows on the NYSE and 84 on the Nasdaq.
That means there are 202 highs against 117 lows. I don’t have the historical data, but that seems like a lower differential than we’ve seen in recent weeks. Could the markets be signaling a correction is near?
If I knew the answer, I’d be a wealthy man.
However, I couldn’t help noticing that BCE (BCE), the Canadian media and telecom company, hit a 52-week low of $35.88 on Tuesday, the 24th time it has done so over the past 52 weeks.
If you’re tempted to buy its stock on the dip, please don’t. There are plenty of reasons why you shouldn’t.
It’s Cutting Nearly 5,000 Jobs
On Feb. 8, the same day BCE reported its Q4 2023 results, which included increasing its dividend by 3.1% to an annual payout of CAD$3.99 (8.2% yield), it announced the company’s largest workforce restructuring in nearly 30 years, eliminating 9% of its overall headcount, or approximately 4,800 people.
In the same breath, CEO Mirko Bibic, who earned CAD$13.6 million in 2022, said the following about its quarter and year:
Bibic said in its Feb. 8 press release, “The Bell team has demonstrated strong executional discipline and cost containment this quarter, enabling Bell to deliver solid results in Q4 and throughout 2023."
In addition to cutting 4,800 people from some media properties such as CTV and BNN Bloomberg -- a partnership between BCE and Bloomberg -- it is reducing programming at many of its TV properties and selling 45 of its 103 regional radio stations.
In a country as far and wide as Canada -- its population of 40.5 million is one-eighth that of the U.S. -- eliminating these stations, in many cases, is cutting off a small community’s connection to the rest of Canada.
“I am extremely disappointed in Bell Canada's decision for many reasons,” the Canadian Broadcasting Corporation reported Canadian Heritage Minister Pascale St-Onge’s comments during a press conference to discuss the situation.
“In the past decade, when acquisitions were allowed for those big companies to acquire television stations or radio stations, it came with the promise that they would deliver on news content. And today, they are backing [away] from that promise.”
If you don’t live in Canada, you might not know that consumers absolutely detest BCE and its Toronto-based competitor, Rogers Communications (RCI). According to the latest report from the Commission for Complaints for Telecom-television Services (CCTS), incidents in 2022-2023 of customers losing wireless service were up 93%, while incidents of customers losing their internet were up 48% over the previous period.
Its Media Business Is Experiencing Death by a Thousand Cuts
Poor management decisions over several years have resulted in BCE experiencing a situation not too dissimilar to what AT&T (T) and Verizon Communications (VZ) went through due to their expensive forays into the media business.
Now, BCE is trying to wriggle out of what has become a financial black hole. In 2023, advertising revenue from its Bell Media subsidiary fell by CAD$140 million (8.6%) over a year earlier, resulting in more than CAD$40 million in operating losses by the division in the past year.
In the CEO’s open letter to BCE staff on Feb. 8, Bibic mentioned that it continues to lose CAD$250 million in annual revenue from its legacy wireline business. What legacy phone business isn’t losing revenue?
Bell Media cut 1,300 jobs less than a year ago, or 3% of its workforce. It also closed or sold nine other radio stations.
One example of a poor management decision is the company’s CAD$3.38 billion acquisition of Quebec-based Astral Media in July 2013. The purchase was paid for 75% with cash and 25% BCE stock. Assets acquired included brands such as HBO Canada and Disney Junior, 22 TV services (13 French-language), and 84 radio stations in 50 markets.
According to the company, the Astral acquisition created a national media leader with more than CAD$850 million in EBITDA.
Care to guess Bell Media’s EBITDA a decade later? CAD$697 million, an 18% reduction over 10 years.
Not a winning move.
The Bottom Line
If the Greenberg family, who owned Astral Media before selling to BCE in June 2013, kept the stock they received in the sale, BCE stock would have appreciated by just 14% over 10 years, a compound annual growth rate of 1.3%.
Including dividends, the annual total return would have been 3.4%, about one-quarter the performance of the SPDR S&P 500 ETF Trust (SPY). Hopefully, they were wise and sold out.
A recent study found that in September 2023, the average Canadian paid CAD$7.36 per GB (gigabyte) of mobile data. That’s the 10th most expensive in the world. America was seventh highest at CAD$8.22 per GB.
While I find the American number to be high, the point is that BCE has some of the best conditions for making money from wireless customers. Yet, it cries poverty, suggesting regulatory decisions have done it in.
“We continue to face a difficult economy and government and regulatory decisions that undermine investment in our networks, fail to support our media business in a time of crisis and fail to level the playing field with global tech giants,” Bibic’s message to BCE staff stated.
Regulatory decisions have only enabled BCE to rob Canadians blind. Its management is to blame for its stock’s terrible performance over the past decade.
For good reason, it’s at a 52-week low for the 24th time over the past year. If you’re a dividend investor, avoid BCE stock like the plague.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
