BELL ALIANT INC. (Toronto symbol BA; www.aliant.ca) sells phone and Internet services to 2.5 million customers in Atlantic Canada and rural Ontario and Quebec. It also provides wireless services through an alliance with BCE, which owns 45% of Bell Aliant.
The company continues to replace copper wires with fibre optic cable, which is attracting more high-speed Internet and digital TV customers. Strong demand for these services is also helping offset lower revenue from traditional phones, which still supply 52% of Bell Aliant’s revenue.
The company’s high-speed fibre optic systems now reach 806,000 homes, up from 725,000 at the start of last year. By the end of 2014, it plans to expand its network to one million homes.
In the three months ended December 31, 2013, Bell Aliant’s revenue fell 0.9%, to $688.7 million from $694.8 million a year ago. Before one-time items, earnings were unchanged at $0.38.
The company plans to spend $535 million to $585 million on capital upgrades in 2014, after spending $569.9 million in 2013. The quarterly dividend of $0.475 a share has a 7.1% yield.
Dividend stocks: Brookfield pays $289 million for Pennsylvania hydroelectric plant
BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. (Toronto symbol BEP.UN; www.brpfund.com) owns 196 hydroelectric generating stations, 11 wind farms and two natural-gas-fired plants. In all, it has 6,000 megawatts of generating capacity.
Roughly 31% of Brookfield’s generating capacity is in Canada, with another 52% in the U.S. and 17% in Brazil.
In the quarter ended December 31, 2013, revenue rose 24.0%, to $393 million from $317 million a year earlier. Cash flow jumped to $137 million, or $0.52 a share, from $74 million, or $0.28.
The gains were due to 30.0% higher electricity generation due to favourable rain and wind.
To further boost its power output, Brookfield plans to keep acquiring or building hydroelectric plants and wind farms. It sells virtually all of its electricity under long-term agreements that are an average of 24 years long.
The company just bought 33% of the Safe Harbor facility, on Pennsylvania’s Susquehanna River, for $289 million. With 417 megawatts of capacity, Safe Harbor is one of the largest hydroelectric facilities in the northeastern U.S.
The company has just raised its quarterly distribution by 6.9%, to $0.3875 from $0.3625, for a 4.8% yield.
In the latest issue of Canadian Wealth Advisor, we look at whether Bell Aliant’s capital upgrades will leave it enough free cash flow to maintain its dividend. We also assess Brookfield’s risk in building and acquiring more hydroelectric and wind facilities, and consider its earnings outlook for 2014. We conclude with our clear buy-hold-sell advice on these two stocks.
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