This stock continues to enjoy the benefits of ongoing improvements to its wireless networks and high-speed Internet service.
In the last quarter alone the company enjoyed a 15.5% gain in new wireless customers from a year ago. It is also expanding its networks by acquisitions and the development of next-generation technology. This blue chip trades at just over 16 times forecast earnings for 2018; earlier this year it raised its dividend, which yields a high 5.3%.
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BCE INC. (Toronto symbol BCE; www.bce.ca) is Canada’s largest traditional telephone service provider, with 3.05 million residential customers in Ontario, Quebec, Manitoba and the Atlantic provinces. It also has 3.9 million high-speed Internet users and 2.8 million TV subscribers. In addition, the company sells wireless services to 9.5 million users across Canada and owns TV and radio stations.
The company continues to benefit from ongoing improvements to its networks, which are helping it attract new customers.
In the three months ended September 30, 2018, BCE signed 135,323 wireless customers to long-term contracts (net of cancellations). That’s a 15.5% gain over 117,172 for the year-earlier quarter. The company also added 40,091 customers for its Fibe TV business and 47,749 customers for its high-speed Internet service. Both of those numbers are also net of cancellations.
Thanks to the gains, overall revenue in the quarter rose 3.2%, to $5.88 billion from $5.70 billion a year earlier. That beat the consensus forecast of $5.83 billion.
If you exclude unusual items, such as costs related to acquisitions, BCE’s earnings rose 4.5%, to $861 million from $824 million a year earlier. Due to fewer shares outstanding, per-share profits gained 5.5%, to $0.96 from $0.91. That also beat the consensus estimate of $0.93.
For all of 2018, BCE will spend roughly $4.0 billion on upgrades to its networks and operations.
Part of that spending will go toward next-generation 5G wireless technology, which is about 20 times faster than current wireless speeds. 5G will let BCE offer high-speed Internet service in rural areas where it’s too expensive to build fibre-optic wired systems. The new technology will also help BCE profit as more devices, such as self-driving cars, connect to the Internet. The company’s strong cash flows will easily cover those outlays. It expects free cash flow (regular cash flow less capital expenditures) to rise between 3% and 7% in 2018 to roughly $3.6 billion.
The company’s strong cash flows will easily cover those outlays. It expects free cash flow (regular cash flow less capital expenditures) to rise between 3% and 7% in 2018 to roughly $3.6 billion.
Blue Chip Stocks: New deal extends Internet service across Alberta
In July 2018 the company signed a new, multi-year contract with the Province of Alberta to extend high-speed Internet service to schools, hospitals and other public facilities in 402 rural communities.
BCE owns and operates the high-speed SuperNet system in 27 urban areas across Alberta. Under the new deal, it acquired Axia Media Corp., the privately held firm that owns the SuperNet system in rural areas.
The company has yet to reveal how much it will pay for Axia, or how much it will earn under this expanded contract. However, the deal helps raise BCE’s profile in the province. Gaining full control of SuperNet should also make it easier for the company to invest in and improve the efficiency of the system.
BCE has also teamed up with Ford Motor Co. (New York symbol F) to provide built-in Wi-Fi hotspots in Ford and Lincoln vehicles using Bell’s Connected Car service. The system uses a dedicated external antenna to connect up to 10 mobile devices to the Internet.
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 annual rate of $3.02 yields a high 5.3%. The dividend has grown more than 5% annually over the last 5 years.
For all of 2018, BCE still expects to earn between $3.45 and $3.55 a share. The stock trades at just 16.2 times the midpoint of that range.
Recommendation in TSI Dividend Advisor: BCE is a buy.
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