Finance · Top Story
While dividend investing could be rewarding for long-term investors, I get even more interested when a quality stock’s yield rises because its share price has temporarily fallen. That’s exactly what seems to be happening with Cogeco Communications (TSX: CCA) right now. CCA stock is currently hovering near its 52-week low. While there are some reasons for investors to become cautious, especially around the company’s U.S. operations, I don’t think Cogeco has completely lost its investment appeal. That’s because its Canadian business continues to perform relatively well, free cash flow is improving, and shareholders recently received another dividend increase. In this article, I’ll explain why Cogeco’s solid yield and improving financial trends could make this beaten-down telecom stock an appealing buy near its 52-week low on the TSX today.
Cogeco provides Internet, wireless, video, and wireline phone services to residential and business customers across Canada and the U.S. under the Cogeco and oxio brands in Canada and Breezeline and welo in the U.S. CCA stock has fallen 18% over the last six months, leaving it 23% below its 52-week high and only 2% above its 52-week low. At today’s price of $59.51, the stock offers a 6.6% annualized dividend yield. The recent weakness is partly due to intensified competition in the U.S., a 10% YoY decline in telecom revenue, a smaller subscriber base, and a shift toward Internet-only services. Despite these challenges, Cogeco’s financials remain stable. In the third quarter of fiscal 2026 (ended May), consolidated revenue slipped 4.7% YoY to $697 million, and adjusted EBITDA declined 3% due to weaker U.S. performance. However, the adjusted EBITDA margin improved to 50.5% from 49.6% due to cost reductions and efficiencies. The Canadian business, however, performed well: telecom revenue rose 1.5% YoY to $377 million, and adjusted EBITDA increased 3.9% to $204 million. A $1.7 billion loss included a $2.2 billion non-cash impairment charge related to U.S. operations, but excluding these charges, adjusted profit attributable to shareholders climbed nearly 29% YoY to nearly $100 million. Free cash flow surged 17.6% YoY due to lower financial expenses and reduced costs.
The 6.6% dividend yield is particularly attractive. In July, the company raised its quarterly dividend by 7% YoY to $0.987 per share. Wireless sales remained ahead of plan, and Ohio saw positive Internet subscriber growth for four consecutive quarters. Cogeco also expanded its welo digital brand across its U.S. footprint. The company plans to optimize capital investments to boost free cash flow generation. While U.S. competition remains a challenge, the Canadian profitability, improving free cash flow, and share price near its 52-week low make CCA stock an appealing income investment for long-term investors.
Source: The Motley Fool Canada
