BELL ALIANT INC. $27 - Toronto symbol BA

BELL ALIANT INC. $27 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $6.2 billion; TSINetwork Rating: Average; Dividend yield: 7.0%; www.aliant.ca) sells telephone and Internet services to 2.5 million customers in Atlantic Canada and rural parts of Ontario and Quebec. The company also sells wireless services through an alliance with BCE, which owns 45% of Bell Aliant.

The company faces strong competition from cable providers. In addition, many of its phone customers are switching to wireless devices. However, Bell Aliant’s wireless agreement with BCE, plus upgrades to its high-speed Internet network, are helping it hold on to its current clients and attract new ones.

Bell Aliant’s high-speed fibre optic systems now reach 621,000 homes. The company plans to increase that to 650,000 by the end of 2012.

In the quarter ended September 30, 2012, Bell Aliant’s revenue fell 0.4%, to $697.4 million from $700.2 million a year earlier. Revenue from local phone services fell 5.0%, while long-distance revenue declined 12.0%. That offset gains from wireless (up 9.7%) and high-speed Internet (up 7.9%).

Even with the lower revenue, Bell Aliant earned $0.47 a share in the latest quarter. That’s up 14.6% from $0.41 a share. The higher earnings were partly due to savings from a recent restructuring, which mainly consisted of job cuts.

The company pays a quarterly dividend of $0.475 a share, for a high annualized yield of 7.0%. That dividend appears safe.

Bell Aliant is a buy.

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