Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendations on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor.
Low interest rates continue to spur income-seeking investors to buy high-yielding stocks, like telecoms. BCE Inc. should keep benefiting as more people upgrade their wireless plans and mobile phones. New services, like Internet-based TV, are also fuelling its growth.
BCE INC. (Toronto symbol BCE; www.bce.ca) is Canada’s largest telephone provider, with 5.0 million customers in Ontario and Quebec. It also has 2.3 million high-speed Internet users and 2.4 million TV subscribers. This business supplies 46% of BCE’s revenue.
The company also sells wireless services (29% of revenue) to 8.1 million customers across Canada, and its Bell Media segment (13%) owns CTV Television, specialty channels and radio stations.
In November 2014, the company paid $3.95 billion in cash and stock for the 56% of Bell Aliant that it didn’t already own. Bell Aliant, which accounts for the remaining 12% of BCE’s revenue, sells telephone and Internet services to 2.2 million clients in Atlantic Canada and rural Ontario and Quebec.
Thanks to this purchase, BCE’s earnings rose 13.0% in the three months ended December 31, 2014, to $610 million from $540 million a year earlier. But per-share earnings gained just 2.9%, to $0.72 from $0.70, due to the extra shares the company issued to Bell Aliant shareholders. Revenue rose 2.7%, to $5.5 billion from $5.4 billion.
Uncovering hidden value
Corporate balance sheets sometimes fail to reflect some very valuable assets. In The Successful Investor Pat McKeough seeks out hidden value that brings spectacular gains where many others fail to look—in well-established dividend-paying stocks. Like the real estate assets whose value Loblaw and Canadian Tire unlocked when they spun them into a REIT. Or the many hidden assets that helped make CP Rail an enormous success for our subscribers as Canadian Stock of the Year.
Pat recently released his #1 Canadian Stock of the Year for 2015 in The Successful Investor. You get all the details when you accept a special introductory subscription at a special reduced price. And you will immediately begin getting Pat’s weekly Hotline updates on stock making moves you should know about. Click here to take advantage of this special offer right away.
Dividend stocks: Good results prompt 5.3% dividend hike for yield of 4.7
BCE added 83,498 wireless subscribers, net of cancellations. That’s down 11.5% from a year earlier, but 76% of subscribers under long-term contracts now use smartphones, up from 73%.
That’s good news, because smartphones generate higher fees for BCE than regular cellphones; average monthly revenue per user rose 5.5% in the latest quarter, to $61.12. As well, BCE is doing a good job of hanging on to its wireless customers. Its churn rate, which measures how many subscribers cancelled their service, fell to 1.57% from 1.59% a year earlier.
Meanwhile, the company is seeing strong demand for its TV offerings. It ended 2014 with 933,547 subscribers (including Bell Aliant) to its Fibe TV service, up 42.0% from a year earlier. As well, BCE’s CraveTV video-on-demand service, which launched in December 2014, is attracting more users than the company expected.
The results prompted BCE to raise its quarterly dividend by 5.3%, to $0.65 a share from $0.6175. The new annual rate of $2.60 yields 4.7%.
The company expects its full-year 2015 earnings to improve to $3.28 to $3.38 a share from $3.18 in 2014. The stock trades at a still-reasonable 16.8 times the midpoint of that range.
BCE is a buy recommendation of The Successful Investor.
Tomorrow in our Investor Toolkit, how “investor shorthand” can lead to serious misunderstandings like not knowing the difference between a bubble and a boom.
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