Canadian blue chip stock BCE Inc. is doing well and remains a buy

BCE Inc. earned more last year and expects to earn more in 2015. Given its aim of paying out 65 to 75 per cent of its earnings in profits, the earnings growth leads to dividend growth. This blue chip dividend stock remains a buy for high and rising dividends plus long-term gains.

BCE Inc. earned more in 2014. It grew both internally and with the acquisitions of Bell Aliant and Glentel Inc. The company raised its dividend again. That’s because it aims to pay dividends of 65 to 75 per cent of its earnings per share. BCE (TSX─BCE) expects to earn more in 2015 and should keep raising its dividend. So while the shares have become more costly, they remain a buy for high and rising dividends plus long-term price gains.

In 2014, BCE earned an adjusted $2.524 billion, or $3.18 a share. This was in the upper part of its ‘guidance’ range of earnings of $3.10 to $3.20 a share. The earnings were also up by 6.4 per cent from  $2.317 billion, or $2.99 a share, the year before.

Bell Canada and Bell Aliant added customers. At the end of 2014, they had 8,118,628 wireless customers. That was up by 2.4 per cent from a year earlier. At the year’s end, the companies had 3,297,026 high-speed Internet subscribers. That was up by 5.1 per cent from a year earlier. At year end, they had 2,642,608 TV subscribers. That was up by 6.2 per cent from a year earlier. The growth in TV subscribers was driven by a 42 per cent jump in the number of Internet Protocol TV customers, to 933,547.

Most of BCE’s divisions are growing

One legacy business that declined was Bell Canada’s and Bell Aliant’s wire line divisions. The number of such lines totaled 7,130,852. That was down by 6.1 per cent from the year before. Customers who are always on the go use wireless service almost exclusively. Many see little point in keeping a wire line phone too. This business should continue to decline.

Bell Media is doing well. CTV remains Canada’s “leading conventional TV network during the fall season in all key demographics holding 14 of the top 20 programs nationally among total viewers and all 4 of the top 4 programs among viewers aged 25 to 54.” This is partly why CTV’s advertising revenue rose—which is now rare for traditional media.

Bell Media’s specialty- and pay-TV properties are also doing well. It writes that for the “key 25 to 54 age demographic, viewing was led by TSN and Discovery for sports and entertainment specialty and the Movie Network for pay TV.” The company also owns the five top-rated French-language specialty channels in Quebec for viewers aged 25 to 54.

In 2015, BCE expects to earn from $3.28 to $3.38 a share. The mid-point of $3.33 would represent earnings per share growth of 4.7 per cent. But if this Canadian blue chip stock’s earnings again hit the upper part of its guidance range, then the earnings per share growth will be higher.

In 2015, BCE expects to generate revenue growth of one to three per cent; adjusted underlying earnings growth of two to four per cent; free cash flow growth of eight to 15 per cent. It writes, “All our 2015 financial guidance targets reflect continued healthy projected Wireless profitability and improving Wire line growth as well as the privatization of Bell Aliant, with Adjusted EPS [Earnings Per Share] and free cash flow providing a strong and stable foundation for” the company’s dividend.

BCE remains a ‘dividend aristocrat’. It has raised its dividend again, to $2.60 a share. That’s up by 5.3 per cent from $2.47 a share last year. This blue chip dividend stock offers an attractive yield of nearly 4.7 per cent. This is likely to attract income-seeking investors, who will bid up the price of BCE’s shares.


The Investment Reporter, MPL Communications Inc.
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