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.
What’s going on with Cogeco stock?
As a telecom company, Cogeco provides Internet, wireless, video, and wireline phone services to residential and business customers across Canada and the United States. Its services are offered 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. That decline has left the stock 23% below its 52-week high and only 2% above its 52-week low. As a result, its shares currently trade at $59.51 apiece with a market cap of $2.5 billion. At today’s price, Cogeco also offers an attractive 6.6% annualized dividend yield.
Of course, there are reasons behind the recent weakness. For example, competition is continuing to intensify in the U.S. market, which has led to a 10% year-over-year (YoY) decline in Cogeco’s American telecom revenue in the latest quarter. Other factors like a smaller subscriber base, a shift toward Internet-only services, and competitive pricing also hurt its sales in the region.
The numbers are not all weak
Even with those challenges in the U.S. market, Cogeco’s financials remain stable, which makes me believe CCA stock deserves a closer look at its current price. In the third quarter of its fiscal year 2026 (ended in May), the telecom firm’s consolidated revenue slipped 4.7% YoY to about $697 million. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also declined 3% due to lower revenue from the U.S. business. Still, the company’s adjusted EBITDA margin improved to 50.5% from 49.6% as cost reductions and operating efficiencies helped cushion the weakness.
More importantly, its Canadian business continued to perform well. Last quarter, its Canadian telecom revenue improved on a YoY basis to about $377 million with the help of high-speed Internet customer additions over the last year. Meanwhile, the segment’s adjusted EBITDA rose 3.9% to roughly $204 million.
Cogeco posted a $1.7 billion loss for the quarter, which may look alarming at first glance. However, that figure included a $2.2 billion non-cash impairment charge related to its U.S. business. Excluding these impairment charges and certain other items, the company’s adjusted profit attributable to shareholders climbed nearly 29% YoY to nearly $100 million.
Adding to the optimism, its free cash flow in the latest quarter surged by 17.6% YoY. Lower financial expenses and lower acquisition, integration, restructuring, and other costs helped drive that improvement.
Why the 6.6% yield deserves attention
For a fundamentally strong dividend stock sitting near its 52-week low, Cogeco’s growing payout and efforts to improve the business increase its investment appeal further.
In July, the company raised its quarterly dividend by 7% YoY to $0.987 per share. At the same time, the firm’s wireless sales remained ahead of plan. In the U.S., Ohio delivered a fourth consecutive quarter of positive Internet subscriber growth. Similarly, Cogeco also expanded its welo digital brand across its entire Ohio footprint.
On top of that, Cogeco plans to optimize capital investments next fiscal year to support free cash flow generation.
While Cogeco still has work to do as competitive pressure weighs on its U.S. operations, a 6.6% dividend yield, improving Canadian profitability, stronger free cash flow, and a share price near its 52-week low make CCA stock an attractive income stock for patient long-term investors.
