Do not fall for the BCE dividend: Instead, buy this monthly High-Yield ETF

In January I covered BCE Inc. (TSX: BCE) and marked his towering dividend that was not covered by the distributable cash flow. At the time, the stock gave almost 12%and I remember that I thought: “Whoever buys this is a fool. It is cut.”

And yes, in May BCE halved the quarterly dividend, from $ 0.9975 per share to $ 0.4375. That brought the annual payment per Down share from $ 3.99 to only $ 1.75. The management blamed the usual suspects of regulations, inflation, rising competition in telecom and even delayed immigration, but it did not change the fact that the company simply could not maintain what it paid.

Fast Vooruit to 4 September, BCE now yields 5.17% on the basis of a planned annual basis, but the share itself has fallen by more than 30% in the past year. Even at this “reset” level I still consider it a avoid. If you want passive income from infrastructure -like investments without BCE’s luggage, there is a monthly high -interest exchange fund (ETF) that I think it deserves your attention instead.

Why consider an ETF?

The management of the risk factors BCE accused his dividend reduction (regulation, inflation, competition and delay in immigration) are usually idiosyncratic. In other words, they are specific to BCE and how it runs.

That is why it is dangerous to rely on one stock for income. By diversifying in a basket with “BCE-like” investments, you reduce the risk that the bad balance or poor management decisions of a company will sink in.

So what is a “BCE-like” investment? Strip the poor management, excessive guilt and history of too promising/too little delivery, and you still remain attractive characteristics: inflation-linked cash flows and hard assets.

Telecom is absolutely eligible here because they have a critical infrastructure, such as fiber networks and wireless towers, but it makes little sense to place all your chips on the most debting, least efficient operator. Instead, buy two or three telecom and then expand the scope to companies that have utilities, pipelines and even railways.

How umax works

That’s the advantage of Hamilton -Upper programs Proceeds Maximizer ™ ETF (TSX: Umax). It doesn’t just have BCE. It also has its most important competitors and other names supported by infrastructure in utilities, railways and pipelines.

However, Umax does not stop when owning the shares. It covers a covered call strategy, sales options on approximately 50% of the portfolio. These contracts are written with the money, which means that the fund gives up the most potential benefits when the stock prices gather. The assessment is higher and more reliable income, because those option premiums flow directly back to investors.

The result is a yield of 14.25% on an annual basis, paid monthly instead of every three -monthly. And unlike BCE, Umax has not forced investors to tolerate a dividend reduction of 50%. It is an active structure that is designed for steadily, above average income, and so far it has been delivered.

The foolish collection meals

I can’t understand why some investors stay loyal to BCE. This is not a team sport. Staring at a Ticker symbol does not make the company’s fault better or his management better. If you hold BCE for income, it may be time to reduce your losses and replace it with a diversified, specially built infrastructure income ETF such as Umax.