Bell is a Pure Play Income Stock

BCE Inc. or Bell Canada Enterprises is Canada’s largest telecommunication company. The company provides industry leading broadband communications services to 22.37 million customers across the country.

The company owns Canada’s largest network of data centers, retail outlets, as well as Bell LTE, Canada’s national network. BCE is a leading residential communications provider offering fibre-based Fibe TV and Fibe Internet, Connected Home services, and home phones in seven provinces.

It also provides national wireless services, and a wide range of business communications services including data hosting and cloud computing across the country. Moreover, its multimedia company, Bell Media is Canada’s premier media company hosting the No.1 sports channel TSN.

Bell Canada caters to a diversified customer base which includes retail consumers, businesses, and government customers. It provides an extensive range of products and solutions for all their communication needs.

The company operates through Bell Wireline (53% of 2020 revenues), Bell Wireless (37%), and Bell Media (10%). By products, wireline broadband & TV accounts for 38% of revenues, followed by wireless (37%), wireline voice (15%), and media (10%).

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Investment Data

 


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Revenue Growth & Market Exposure

BCE’s services include Bell Mobility, Virgin Mobile and Lucky Mobile wireless, high-speed Internet, IPTV, and Satellite TV, Home Phone local and long-distance, as well as IP-broadband connectivity services and business service solutions.

BCE has a huge footprint with its LTE wireless coverage reaching out to 99% of the Canadian population. The company has a long track record of providing reliable wireless services. Bell’s fibre footprint reaches 9.7 million locations including direct fibre to the premises (FTTP) capability for ~5.5 million homes and businesses.

The company has continued the roll out of Wireless Home Internet in rural locations with faster speeds. It also continues to expand 5G to new areas with users consuming 2x more data and resulting in ~20% higher monthly recurring revenue. BCE announced that Nokia will be its first 5G network equipment partner.

BCE is strategically positioned across all product lines and is a market leader in the Internet and TV. Growing demand for data and communication infrastructure should act as a tailwind for the company. Bell Canada’s wireless segment is a fast growing, high margin business.

Its all-fibre internet network further ensures gigabit internet speeds, home Wi-Fi, and innovative TV services, which supports low customer churn rates. With more than 140 years in business, customers recognize Bell Canada for its fast internet speeds and large network footprint. BCE is rapidly expanding its Canadian broadband fibre and wireless network infrastructure and is incurring capital investments of over $4 billion annually. 

The third quarter was marked by the re-opening of retail sales and service for wireless, Internet and TV and resumption of live sports programs. BCE continued to add customers across retail Internet, IPTV, and wireless segments.

The company witnessed improved operating metrics driven by increasing customer activity, and broadband network leadership despite ongoing COVID-19 impacts. Though advertising revenue resumed, Bell Media might continue to witness weakness till the first half of FY2021.

Dividends

Bell Canada is a Dividend Aristocrat raising its dividends over the last decade. It currently sports an attractive dividend yield of 6% and a dividend yield of 74%. The company has a solid history of giving high returns to shareholders.

The company has increased its dividends for 15 consecutive years, last raising it by more than 5%. BCE has raised its payout by 5% or more for 12 consecutive years. The company has maintained a dividend CAGR of 7% over the last decade. Bell Canada has a target dividend payout ratio of 65% – 75% of free cash flow.

BCE’s wireless business generates approximately 50% of its cash flow and is growing at a fast pace across Canada. The company also spends hundreds of millions of dollars on its wireless network annually to improve its performance and coverage. Ownership of Canada’s most advanced fibre and wireless networks is its biggest advantage. 

Strong wireless and residential wireline operations and market leading media assets generate reliable and robust cash flow for BCE, necessary for maintaining both capital investment and shareholder returns. The company’s cash generation was about 14% higher than in 2019.

BCE continues to enhance its network leadership with the expansion of fibre and wireless networks, including 5G. It also enhanced its 4G wireless network while continuing the work for the mobile 5G revolution. BCE should continue to increase its dividend driven by a strong financial position and strong free cash flow generation.

Bell (BCE) historical Yield
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Competition

The four largest cable companies in Canada have an estimated 53% market share with the balance of industry being served by satellite TV and regional providers. The company faces competition from the likes of Rogers Communications (RCI) and Telus (TU). Rogers Communication is the largest Canadian wireless and cable TV provider, while Telus Corporation is the second largest telecom company in Canada.

Other competitors include Shaw Communication and Cogeco Inc. Shaw is amongst the large providers of residential communication services in Canada. Cogeco provides cable TV, telephone, and Internet to customers in Ontario, Quebec, and some parts of the US.

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:BCEBCEBCECommunication ServicesTelecommunication Services0.5560.9255.3722.4022.403.010.05755.751.345043.500.108259Tollbooth - RegulatedNOYESYESNOCanada1
TSE:TTTelusCommunication ServicesTelecommunication Services0.6427.6435.6530.0530.051.020.04584.581.284441.270.110878Tollbooth - RegulatedNOYESYESNOCanada1
TSE:RCI.BRCI.BRogersCommunication ServicesTelecommunication Services0.3163.8132.4720.2720.273.440.03133.130.630942.000.039513Tollbooth - RegulatedNONONONOCanada1
TSE:SJR.BSJR.BShaw CommunicationsCommunication ServicesTelecommunication Services0.3635.6618.0024.9324.931.430.03323.320.8285121.190.034723Tollbooth - RegulatedNONONONOCanada1
TSE:QBR.BQBR.BQuebecor Inc.Communication ServicesTelecommunication Services0.5832.928.0913.9613.962.440.03343.340.387041.100.261453Tollbooth - RegulatedNONOYESNOCanada1
TSE:CCACCACogeco Cable IncCommunication ServicesTelecommunication Services0.68114.405.5214.1014.108.110.02242.240.291042.560.127376Tollbooth - RegulatedYESYESYESNOCanada1
TSE:CGOCGOCogecoCommunication ServicesTelecommunication Services0.6891.101.3510.7110.718.850.02392.390.238242.180.141876Tollbooth - RegulatedYESYESYESNOCanada1

Bottom Line

BCE’s large broadband network investments, ongoing service improvement, and efficient operations should help in retaining its market leadership position. The company continues to invest in enhancing its network quality and capacity, 5G network and broadband Internet services.

It is well-positioned to address the growing communications needs at home and in the workplace with its high-performance networks, new services and content. BCE should gain as the economy recovers on the back of a vaccine-rollout.

Holding Bell is the equivalent of holding bonds in my view. Solid and consistent. Bell is also a dual listed stock on the NYSE if you want to hold it in USD but your dividends will go through a currency conversion.

BCE vs TSX vs SP500
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Bell (BCE) historical PE
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DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.