We feel this stock will move higher over the next few years as it expands its high-speed Internet and 5G wireless networks. Those upgrades will help it attract new customers. Steady growth will provide more cash flow to keep raising your dividend annually, as it has done each year since 2008.
Meanwhile the shares trade at just 18.6 times the company’s 2022 earnings forecast.
BCE INC. (Toronto symbol BCE; www.bce.ca) is Canada’s largest traditional telephone service provider. It also offers wireless services and high-speed Internet access. That’s in addition to owning TV and radio stations.
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BCE is still benefiting from strong demand for new mobile phones and high-speed Internet. As a result, revenue in the quarter ended March 31, 2022, rose 2.5%, to $5.85 billion from $5.71 billion a year earlier. Given cost savings from a restructuring plan and lower interest payments, earnings per share rose 14.1%, to $0.89 from $0.78.
The telecom also added 26,024 (net) high-speed Internet users in the latest quarter, 22.7% from a year earlier, as well as 12,260 (net) fibre-optic TV subscribers, up 14.6%. The return of live sports has also helped boost advertising revenue at its media operations. Those gains help offset the loss of 42,345 residential landline customers.
As a result, revenue in the quarter rose 2.5%, to $5.85 billion from $5.71 billion a year earlier. Thanks to cost savings from a restructuring plan and lower interest payments, earnings before unusual items rose 15.2%, to $811 million from $704 million. Due to more shares outstanding, earnings per share improved at a slower rate of 14.1%, to $0.89 from $0.78.
BCE aims to spur its long-term growth with big new investments in networks. It plans to spend $14 billion on capital upgrades between 2020 and 2022. Roughly $10 billion of that total will go to building out its fibre-optic network and ultrafast 5G wireless infrastructure.
Dividend Stocks: Expanding fibre-optic networks will also pay off
Under its plan, BCE will increase the number of homes and businesses with direct fibre-optic service by 900,000 locations this year. That will expand its high-speed services to 8.1 million locations by the end of 2022.
The company is also using its existing fibre and wireless networks to expand high-speed access to households in rural locations and smaller towns.
BCE is investing heavily in its new 5G (fifth-generation) wireless networks. They are up to 100 times faster than current 4G (or LTE) networks. That speed allows for much faster video and data transfers and helps BCE attract new subscribers. 5G will also prompt existing users to upgrade their smartphones.
Right now, the company’s 5G service is available to 75% of Canada’s population, rising to 80% by the end of 2022.
So far, 5G users consume twice as much data as regular users and generate 20% more revenue per month. That’s partly why the average monthly revenue per wireless user in the first quarter of 2022 rose 5.1%, to $57.98 from $55.17 a year earlier. What’s more, the churn rate, which shows how many mobile phone customers under long-term contracts cancelled their service (the lower, the better), improved to 0.79% in the quarter from 0.89% a year earlier.
Thanks to the strong earnings, BCE raised your quarterly dividend by 5.1% with the April 2022 payment, to $0.92 a share, up 5.1% from $0.875. The new annual rate of $3.68 yields a high 5.8%.
Investors should expect earnings to rise about 7% this year to $3.40 a share. The stock trades 18.6 times that forecast. That’s a reasonable multiple in light of BCE’s high market share and improving growth prospects.
BCE needs also to improve its telephone service in some areas. A good friend had so much trouble with his cell phone , he gave it up and went back to a land line. He lives out in the country. I too have cell phone troubles –dropped calls almost every day . If I had a telephone signal receiving aerial reaching about 4o feet above my roof I might get better cell phone service; I too am thinking of going back to a land line even though it is more expensive and less convenient.
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BCE needs also to improve its telephone service in some areas. A good friend had so much trouble with his cell phone , he gave it up and went back to a land line. He lives out in the country. I too have cell phone troubles –dropped calls almost every day . If I had a telephone signal receiving aerial reaching about 4o feet above my roof I might get better cell phone service; I too am thinking of going back to a land line even though it is more expensive and less convenient.