Blogs & Comment

BCE dividend safe?

A thread on the Financial Webring discussion forum asks How safe is BCE’s Dividend? One poster said the dividend on the common stock, now yielding 6.4%, was getting too yummy and possibly signaling trouble ahead. Another referenced a Globe and Mail article highlighting increased rivalry between BCE and Rogers Communication in central Canada and the prospect of more competition to come as new firms entered the wireless market early next year.
Yet, as reported on, a good number of money managers appearing on the Business News Network (BNN) channel have voiced bullish views on BCE. Heres a quick look at their reasons:

  • David Baskin of Baskin Financial Services – one of his top picks, says he likes the strong cash flow and pledge to raise the dividend
  • Steven Conville of Blackmont Capital – thinks BCE has the best balance sheet of the three major telcos and is nice defensive play
  • Laura Wallace of Coleford Investment Management – sees strong management with a well-defined plan to cut costs aggressively
  • Bruce Campbell of Campbell and Lee Investment Management one of his top picks, cites the price currently being depressed by the Ontario Teachers Pension fund selling off its stake in BCE
  • Ross Healy of Strategic Analysis Corp a top pick for him because it is cheap, having fallen to an all-time low at its book value of about $22 a share
  • Craig MacAdam of Aurion Capital would buy because balance sheet and new management is quite strong
  • Colin Stewart of J.C. Clark Investments Ltd. – trades at a low valuation multiple of about 4.5 to 5 enterprise/EBITDA

The bearish money managers on BNN dont recommend BCE because its a defensive, utility stock and such stocks tend to lag during economic upturns. They also dont like its growth prospects vis a vis peers: Telus is seen as the better telco for wireless-growth prospects and Rogers Communications is seen as having the better technology over the longer term.

Im not bullish on BCE’s long-term prospects either but did buy the stock when it crashed after the privatization bid collapsed, thinking it would be good to hold for a while for the income and buybacks (anda possible sale around $28 to $30). I feel encouraged to continue holding for several of the reasons given by the bullish money mangers.

Last week, there was a bit of a rally in BCE shares. Also, its bond sale was oversubscribed and raised $1 billion. And a report out during the week from BMO Nesbit Burns predicted BCE Inc.will use its excess cash to renew its stock buyback. The company currently pays out 65% ofearnings per share.

In a Globe and Mail interview a few days ago, Bissett Investment Management senior vice-president Juliette John said BCE has become more shareholder-friendly: It has been buying back stock, raising its dividend and cutting costs. As for coming wireless competition, she doesnt think it will be a serious threat to existing providers given the sluggish economy and tight credit conditions.