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The constant changes in the proposed tariff regime being announced by the Trump administration in the U.S. have left investors and company managements struggling to process the outlook for earnings and revenues.
President Trump suspended the extremely high tariffs on trading partners announced on Liberation Day (April 2) for 90 days, leaving a base 10% tariff in place. Canada and Mexico were exempted from tariffs for exports compliant with the U.S. Mexico Canada (USMCA) trade agreement, with the exception of 25% tariffs on steel, aluminum, and non-compliant autos. And so stock markets breathed a sigh of relief, as the major indexes gained 5% in the week to April 11.
Many observers pointed to the selloff in the U.S. Treasury bond market as the most serious casualty of the volatility caused by the Trump tariffs, where yields on the benchmark 10-year bond rose 50 basis points (bps) to over 4.5% as the impact of the tariffs on the economy and government revenues worried bond investors.
Meanwhile, the U.S. dollar actually weakened sharply, even though bond yields were rising. This indicated a loss of confidence by foreign investors in U.S. assets. Several commentators suggested the U.S. might be experiencing a “Liz Truss” moment. This refers to the selloff in the U.K. bond markets and pound sterling in late 2022, when the then U.K. Prime Minister Liz Truss announced unfunded tax cuts, which led to disorderly selling by institutions that had been using leverage against their government bond holdings to increase their returns.
Certainly, it makes sense for investors to look for sectors and asset classes that have held up during this tumultuous period, as the S&P 500 Index and the Nasdaq Composite Index fell by almost 20% at their lows in early April from their highs in February. This is usually regarded as the definition of a bear market. Notably, the S&P/TSX Composite outperformed, down only 10% over the same period, helped by its low exposure to technology and high weights in financials, gold, and defensive sectors like utilities, pipelines, and telecoms. The major stock indexes have since rallied as the Trump administration has toned down the tariff threats.
The likelihood of further declines in interest rates in both Canada and the U.S. is helping rate-sensitive sectors such as utilities, financials, REITs, and telecoms. And even with the recent rise in longer-term bond yields, the iShares Canadian Bond Universe ETF is flat before taking interest into account.
One sector that is worth looking at, especially as it has been a dreadful performer over the last few years, is telecommunications, where price competition in the mobile area and cord-cutting by subscribers for their traditional wireline (fixed line telephones and cable) has hurt margins and put pressure on balance sheets strained by the capital investment needed to upgrade to 5G capability.
Canada has been particularly competitive, as the sale by Rogers of low-cost challenger brand Freedom Mobile to Quebecor as a condition of being allowed to buy Shaw Communications in 2023 has seen mobile rates under pressure. As a result, BCE, Rogers, and Telus are down 45%, 40%, and 10% respectively over the last five years before taking income into account. However, other major telecoms companies in the U.S. and Europe, such as Verizon, Vodafone, and Orange are down 25%-35% over the last five years too.
One unloved telecom worth a look is Quebec-based Cogeco.
Cogeco Inc. (TSX: CGO) is the second-largest operator of cable and broadband systems in Ontario and Quebec and the eighth largest in the U.S. with operations in 13 states. It boasts 1.6 million subscribers and offers wireless services in most of its U.S. operating territories. Through Cogeco Media, it also owns 21 radio stations in Canada, primarily in Quebec. With majority voting control by the founding Audet family, any potential transaction would require their approval, and an attempted takeover in 2019 was rejected.
For the six months ended Feb. 28, Cogeco’s revenues and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were flat, at $1.52 billion and $728 million respectively. Profit was down 4%, at $185 million, although free cash flow was up 9.5%, at $265 million.
The quarterly dividend was raised 8%, to $0.922, in the second quarter, equivalent to a yield of 5.9%, The dividend has been consistently raised every year, and is 67% higher than it was five years ago, representing a conservative payout ratio of 40%.
Cogeco has delivered steady performance during an operationally challenging period for cable and telecoms companies. Its Breezeline U.S. operations, which represent approximately 50% of its revenues, give it growth potential. Combined with its move into mobile phones through becoming an MVNO operator, Cogeco offers a relatively high and sustainable dividend with the prospect of some growth in operational earnings.
Before investing, consult with your financial advisor to ensure the security aligns with your financial objectives and your risk-tolerance level.
Gavin Graham is a veteran financial analyst, money manager, formerly Chief Investment Officer of BMO Financial, and a specialist in international investing, with over 35 years’ experience in global investment management. He is currently Chief Investment Officer of Calgary-based Spire Wealth Management.
Notes and Disclaimer
Content © 2025 by Gavin Graham. This is an edited version of an article that first appeared in The Income Investor newsletter. Used with permission.
The commentaries contained herein are provided as a general source of information, and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.
The views expressed in this post are those of the author. Equity investments are subject to risk, including risk of loss. No guarantee of performance is made or implied. The foregoing is for general information purposes only. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.
Image: iStock.com/AndreyPopov
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