A major 2017 acquisition helped spur more growth for this Canadian blue chip stock.

But the company also continues to spend heavily improving its networks. That is attracting new customers, which in turn generates the cash flow to pay down debt and increase dividends. After its most recent dividend hike, the stock yields a high 5.5%.

BCE INC. (Toronto symbol BCE; www.bce.ca) is Canada’s largest traditional telephone service provider, with 3.2 million residential customers in Ontario, Quebec, Manitoba and the Atlantic provinces. It also has 3.8 million high-speed Internet users and 2.8 million TV subscribers. In addition, the company sells wireless services to 9.2 million users across Canada and owns TV and radio stations.

In March 2017, the company completed its acquisition of Manitoba Telecom Services. That utility has 1.3 million telephone and wireless customers in the province. BCE paid $3.9 billion. That price included Manitoba Telecom’s debt of $972 million.

Thanks partly to this major purchase, revenue in the three months ended March 31, 2018, rose 4.8%, to $5.59 billion from $5.34 billion a year earlier.

The company’s heavy investments in its wireless and Internet networks have also helped to spur its revenue. BCE signed 68,487 wireless customers to long-term contracts (net of cancellations) in the latest quarter. That’s a gain of 91.4% over 35,782 new users for the year-earlier quarter. The company also added 13,573 customers for its Fibe TV business and 19,647 customers for its high-speed Internet service.

If you exclude costs related to the Manitoba Telecom purchase and other unusual items, BCE’s earnings in the quarter rose 2.3%, to $719 million from $703 million a year earlier. But due to more shares outstanding, per-share profits were unchanged at $0.80. That missed the consensus estimate of $0.82.

As of March 31, 2018, BCE’s debt was $18.2 billion. That’s equal to 37% of its market cap.

Blue Chip Stocks: Company acquires controlling stake in film and TV production studio

BCE also owns TV and radio stations through its Bell Media business. In 2017, that operation accounted for 12% of the company’s total revenue, and 8% of its earnings.

In March 2018, Bell Media acquired a majority interest in Pinewood Toronto Studios, which owns and operates a film and TV production facility in downtown Toronto. Bell Media has yet to reveal how much it paid for that stake.

Bell Media now plans to expand the Pinewood facility by just over 50%. That should increase content for Bell Media’s various channels.

At the beginning of 2018, BCE completed its acquisition of home security firm AlarmForce Industries for $182 million. In March, the company announced it would sell AlarmForce’s Western Canadian operations (B.C., Alberta and Saskatchewan) to Telus Corp. (Toronto symbol T) for $66.5 million. The deal makes sense for both companies. Most of BCE’s landline residential customers are east of Saskatchewan. Telus has the majority of its residential lines in Alberta and British Columbia.

BCE trades at 15.4 times the forecast 2018 earnings of $3.55 a share. The company last raised its quarterly dividend with the April 2018 payment. Investors now receive $0.755 a share, up 5.6% from $0.7175. The new annual rate of $3.02 yields a high 5.5%. BCE’s dividend has now grown an average of 5.3% annually over the last 5 years.

Recommendation in TSI Dividend Advisor: BCE is a buy.

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