BELL ALIANT INC. $26.87 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $6.1 billion; TSINetwork Rating: Average; Dividend yield: 7.1%; 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. Even after these costs, it will have free cash flow of $300 million to $360 million, which should let it keep paying quarterly dividends of $0.475 a share, for a 7.1% yield.
Bell Aliant is a buy.
