The Company in a Nutshell
- With a +5% yield, this Dividend Aristocrat is better than a bond.
- BCE was associated with the classic wireline phone for many years but has now evolved into the most balanced telecom in Canada.
- The company is a real money printing machine.
- Download PDF format (Last reviewed: Feb 18th 2020)
|PRO Rating||4||Dividend Yield||5.59%|
|Dividend Safety||3||Dividend Growth Since||2009|
|DDM Valuation||21.62%||Dividend Frequency||Quarterly|
BCE is both a wireless and Internet service provider, offering wireless, broadband, television, and landline phone services in Canada. It is one of the big three national wireless carriers, with its nearly 10 million customers constituting about 30% of the market. It is also the ILEC (incumbent local exchange carrier–the legacy telephone provider) throughout much of the eastern half of Canada, including in the most populous Canadian provinces–Ontario and Quebec. Additionally, BCE has a media segment, which holds television, radio, and digital media assets. BCE licenses the Canadian rights to movie channels including HBO, Showtime, and Starz. In 2019, the wireline segment comprised just over half of total EBITDA, while wireless comprised 38%, and media provided the remainder.
|General Information||GE Data|
|Expected Earnings Date||2020-05-01|
|Next ex-dvd date||N/A|
When you have the possibility to invest in a strong yielder as BCE and still hope for a small stock appreciation growth, you must take a hold of it. BCE shows a well-diversified business model and will continue to generate strong cash flow in the future. The company is a real money printing machine. As BCE is part of an oligopoly (Telus, Rogers and BCE controls about 90% of wireless market), there is limited competition and high barriers to entry. Since BCE offers a wide array of products, it can increase revenue generated by each customer.
|5-Yr Rev. Growth:||2.63%|
|5-Yr EPS Growth:||2.56%|
|5-Yr Div Growth:||5.12%|
BCE’s debt level is not to be underestimated. BCE is a giant… with a giant debt. This is not a perfect situation as interest rates are now rising. As the Canadian Government keeps pushing for more competition in the wireless industry, BCE may see additional competitors adding more pressure on margins in the future. For one Shaw’s desire to be invited in the wireless club is pressuring the Big 3 to take action. BCE will also have to invest massively in 5G to remain competitive. This means lots of money spent outside their dividend growth policy. Finally, BCE still has a good chunk of its business coming from wireline service. This is not a growing business to say the least.
|Financial Debt to EBITDA (TTM)||2.74|
|Current Ratio (Quarterly)||0.56|
|Free Cash Flow (Quarterly)($B)||0.938|
Dividend Growth Perspective
Management maintained a high (but under control) payout ratio over the past 10 years. While distribution increased steadily since 2010, the cash payout didn’t move much. BCE should remain cautious, but there is room for dividend growth. BCE is probably the best compromise for an income seeker. While its stock is relatively stable, shareholders enjoy a steady yield. Since payment is secure, BCE falls into the “buy and sleep” stock.
|Payout Ratio (%)||92.95%|
|Cash Payout Ratio (%)||73.74%|
|Enter Expected Dividend Growth Rate Years 1-10:||5.00%|
|Enter Expected Terminal Dividend Growth Rate:||5.00%|
|Calculated Intrinsic Value OUTPUT 15-Cell Matrix||Metric2||Metric3||Metric4|
|Discount Rate (Horizontal)||Discount Rate (Horizontal)||Discount Rate (Horizontal)|
|Margin of Safety||9.00%||10.00%||11.00%|
|Market Cap ($)||52B|
|Price to Book Ratio||3.04|
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