The Successful Investor Hotline – Friday, December 18, 2009

Article Excerpt

BCE INC., $27.51, Toronto symbol BCE, has increased its quarterly dividend by 7.4%, to $0.435 a share from $0.405. The new annual rate of $1.74 yields 6.3%. This is the company’s third dividend hike since a private consortium led by the Ontario Teachers’ Pension Plan dropped its plan to buy BCE a year ago. BCE has also earmarked $500 million for share buybacks. That’s equal to 2.4% of its $20.9-billion market cap. From December 2008 to May 2009, the company spent $986 million to buy back 5% of its shares. Share buybacks increase the value of the remaining shares. As well, BCE is contributing $500 million to its employee defined-benefit pension plan. The payment is voluntary, and should lower BCE’s annual pension expense by $45 million, starting next year. BCE can comfortably afford these moves. It should generate up to $1.4 billion in “free cash flow” in 2009. (Free cash flow is operating cash flow minus expenses for upgrades and maintenance. This is…