BELL ALIANT INC. $28 (Toronto symbol BA, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 227.8 million; Market cap: $6.4 billion; Price-to-sales ratio: 2.3; Dividend yield: 6.8%; TSINetwork Rating: Average; www.bellaliant.ca) sells telephone and Internet services to 2.6 million customers in Atlantic Canada, as well as rural parts of Ontario and Quebec. It also sells wireless services through an alliance with BCE; BCE owns 45% of the company.
The company continues to replace its copper-wire cables with fibre-optic lines. This lets its sell more high-speed Internet and digital TV services, and offset declining demand for its regular phone services, which still account for 60% of its revenue.
Bell Aliant’s fibre-optic systems now reach 458,000 homes. The company plans to expand this to 650,000 homes by the end of 2012.
In 2011, revenue fell 1.2%, to $2.78 billion from $2.81 billion in 2010. Revenue from local phone service fell 4.6%, while long-distance revenue fell 3.8%. That offset gains from wireless (up 7.7%) and high-speed Internet (up 3.8%).
Bell Aliant earned $327.0 million, or $1.41 a share, in 2011. It lost $1.0 billion in 2010, mainly because of writedowns and costs related to the early repayment of debt. The company converted from an income trust at the start of 2011, so its 2010 earnings are not directly comparable.
The company expects to spend $550 million to $600 million upgrading its networks in 2012, compared to $573 million in 2011.
That’s about half of its projected 2012 cash flow of $1.3 billion. That should also let it keep paying quarterly dividends of $0.475 a share, for an annualized yield of 6.8%.
The stock trades at a reasonable 17.1 times its projected 2012 earnings of $1.64 a share.
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