Topic: Dividend Stocks

BELL ALIANT INC. $28 – Toronto symbol BA

BELL ALIANT INC. $28 (Toronto symbol BA, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 229.1 million; Market cap: $6.4 billion; Price-to-sales ratio: 2.3; Dividend yield: 6.8%; TSINetwork Rating: Average; www.bellaliant.ca) sells phone and Internet services to 2.4 million customers in Atlantic Canada and rural Ontario and Quebec.

The company continues to invest heavily in fibre optic networks. It now has 963,048 high-speed Internet users (up 3.9% from a year earlier) and 189,781 digital TV customers (up 38.3%).

However, lower demand for regular phone services caused its revenue to fall 1.2% to $675.7 million in the three months ended March 31, 2014, from $683.6 million a year earlier. Before one-time items, earnings declined 9.1%, to $0.40 a share from $0.44.

Due to the cost of Bell Aliant’s network upgrades, its annual dividend of $1.90 a share (6.8% yield) will account for more than 100% of its cash flow, after capital expenditures. However, that payout ratio should drop to 75% to 85% after it finishes these projects by 2016. The stock trades at a high, but still reasonable, 17.5 times Bell Aliant’s forecast 2014 earnings of $1.60 a share.

Bell Aliant is a buy.

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