BCE Stock and Royal Bank Are Straight-Up Bargains Today

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After another week of turbulence in broader markets, value investors may wish to give some of their favourite blue-chip dividend plays a second look. Undoubtedly, rate-sensitive blue chips have taken a hit to the chin. And the damage may not yet be over with, as the Bank of Canada weighs its options come the next big meeting. In any case, I think long-term dividend hunters should start taking the telecom and big bank stocks seriously, as they continue to exhibit tremendous weakness.

At writing, BCE (TSX:BCE) and Royal Bank of Canada (TSX:RY) stocks seem like terrific, albeit untimely, bargains as we head into the final quarter of 2023. Whether a rate-induced recession strikes shares down in the first half of 2024 is the big question.

Regardless, I’m not so sure how much further a name like BCE has to fall, even if a Canadian recession does take a temporary bite out of earnings. At the end of the day, it’s not the recessions we see coming that can do the most damage; it’s the ones that hit in upbeat environments when it seems like nothing can go wrong.

Of course, recessions can always weigh heavily. But at the end of the day, it’s stock market plunges that come before recessions, not the other way around. Indeed, markets like to look ahead. And when a recession finally does hurt quarterly results, it may already be off to the races for investors who are rushing to get ahead of others before an inevitable recovery.

As the Bank of Canada does its best to avoid a disastrous fate for the economy, I’d be willing to give names like BCE and Royal Bank the benefit of the doubt. Shares are too cheap today. And while a cheap stock can always get cheaper, I find it hard to pass up on the risk/reward tradeoff offered at today’s valuations.

BCE

BCE is a Canadian telecom behemoth with a $50 billion market cap. The company has endured growth woes over the years. And as the media segment sinks in the face of a recession, it’s becoming increasingly difficult to find any room for optimism. The stock has lost about a quarter of its value since its 2022 peak. More recently, the stock fell to multi-year lows, causing the dividend yield to break the 7% mark. Whenever a steady blue chip offers you a yield at or north of 7%, I think you have to take it.

Rate struggles and the turbulent telecom climate will weigh on results. But I think BCE stock can find the means to turn a corner, even without any meaningful catalysts. The stock is oversold, with a payout that should have passive income investors salivating.

With a 0.5 beta, the stock is less correlated to the TSX Index and may be in a spot to turn a corner even without help from the averages. With a fairly strong support level in the $54-55 range, I also view BCE stock as compelling from a technical standpoint.

Royal Bank of Canada

Royal Bank of Canada is dividend royalty, and it should be considered whenever shares take a bit of a dive. Today, the stock is nearing 52-week lows at around $120 per share. At 11.9 times trailing price to earnings, with a nice 4.45% dividend yield, the premier bank is trading at a less-than-premier multiple.

Like BCE, I think the recent plunge has created a terrific buying opportunity for those willing to fasten their seatbelts over the next three to five years. When it comes to Big Six banks, RY stock remains a king among men.

The post BCE Stock and Royal Bank Are Straight-Up Bargains Today appeared first on The Motley Fool Canada.

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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.