BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $25 (Toronto symbol BA.UN; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 228.4 million; Market cap: $5.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 11.6%; SI Rating: Above Average) provides telephone services in Atlantic Canada, as well as rural parts of Ontario and Quebec.
As part of the deal that created the trust in 2006, Bell Aliant transferred its wireless operations to BCE, which owns 45% of the trust.
Bell Aliant earned $373.0 million in 2009. That’s up 10.8% from $336.6 million in 2008. Earnings per unit rose 11.5%, to $2.33 from $2.09, on more units outstanding.
The gain was mainly due to the trust’s recent restructuring, which included cutting 5% of its workforce and merging its 16 customer-support call centres in Atlantic Canada into five main centres. The restructuring saved the trust $111.1 million in 2009. Cash flow per unit rose 8.0%, to $3.39 from $3.14.
Revenue fell 2.2%, to $3.17 billion from $3.25 billion. The trust had 2.9 million local telephone subscribers at the end of 2009, down 5.0% from the previous year.
Like BCE, Bell Aliant is upgrading its high-speed Internet service. That has helped it attract new users: it now has 809,866 high-speed users, up 7.0% from 2008. The trust will spend $65 million on network upgrades this year. That’s more than double its 2009 spending.
Bell Aliant will convert to a regular, dividend-paying corporation before Ottawa starts taxing income trusts on January 1, 2011. The conversion will force Bell Aliant to pay income taxes. It will also force the trust to cut its current monthly distributions of $0.2417 a unit (for an 11.6% annual yield). However, the dividend tax credit will offset much of the impact of a distribution cut.
As well, the conversion may prompt BCE to buy the remaining units. While that’s not reason enough to buy, the possibility of a takeover adds to Bell Aliant’s appeal.
Bell Aliant is a buy.
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