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  • Dara 

    I wan’t to buy BCE, but find find BCE has borrowed more than 30 billion, how do I ascertain what assets it owns, a breakdown of all assets, and what their market value is. If it declared backruptcy tomorrow will the assets cover all the debt and have equity to, or enough left over to satisfy shareholders and give them peace of mind. Recently net profit was not enough to cover dividends, is it manipulating cash flow if not is it borrowing, hence paying high interest which again is not sustainabe, therefore low stock price. Would appreciate a list of assets it owns, how do I find out.

    • Scott 

      Thanks for your question. BCE’s latest quarterly report, available on its web site http://www.bce.com, has all the financial info you need.

      There is virtually no chance that the company will declare bankruptcy—and besides, BCE could always sell off assets to cover debt repayments if needed.

      Meanwhile, BCE’s shares are trading at about the low they hit in March 2020.

      But notably, rival Telus has suffered a somewhat similar drop. BCE is down about 27% from its 2023 high and down 36% for its all-time high in 2022. Telus is down about 21% from its 2023 high and down 33% for its all-time high in 2022.

      This indicates that there is likely more to BCE’s (and Telus’s) drop than dividend coverage.

      Traditionally, Utilities and so on are said to suffer when interest rates rise—for example, they have a lot of debt, and higher rates make it more expensive to raise money and refinance existing debt.

      As well, their shares, which typically offer high yields, compete with fixed-income instruments for investor interest.

      All in all, while the stock is down, we think BCE will recover and move higher.

      Meanwhile, here’s a look at the stock’s dividend sustainability:

      We think that in some cases, the best measure of a company’s ability to maintain its cash dividends is its cash flow per share, rather than its earnings per share.

      Earnings per share includes a number of non-cash items such as depreciation/depletion and amortization. These are reported for tax purposes. Those changes also have the effect of distorting regular earnings. So, rather than focus on earnings, we also look at cash flow. That excludes items they don’t have to set aside cash for, including those depreciation charges.

      For example, in 2023, BCE made $3.21 per share (excluding one-time items). However, it reported cash flow per share of $8.82—more than enough to cover its $3.99 annual dividend.

      Meanwhile, BCE continues to report improved results….and a dividend increase. All this should support its current credit rating.

      But more on BCE’s dividend sustainability:

      There’s lots of media concern lately about its dividend sustainability. But they are using BCE’s own “free cash flow” figure—which includes capital spending (not just maintenance capital spending)—which in many ways is discretionary—in fact, it’s cutting back on the buildout of its fibre, 5G and 5G+ network infrastructure this year.

      While not guaranteed…the payout seems safe.

      In fact, the company has just raised its dividend (although the 3.1% increase is below the 5% or so raises in previous years.

      The company is cutting back on capital spending and making big job cuts—so that adds to its dividend sustainability.

  • Dara 

    Thank you very much for the info. appreciate it. Went through the info almost line by line (difficult to understand and grasp all the info).
    What you sent me does not answer my question about what happens to common shareholders if BCE goes bankrupt. Where do I get info on the three items listed below (break down of the amounts, what assets make up the totals).

    Property plant & Equipment $30,357,000,000
    Intangible Assets $16,770,000,000
    Goodwill $10,997,000,000

    Regards and all the best.

    • Scott 

      In the event of a bankruptcy, the assets available to pay off creditors, bondholders, preferred shareholders and so on would primarily consist of cash, short-term investments, property plant and equipment,

      Goodwill and intangibles have no actual sale value.

      There’s no real way to estimate the current value of property plant and equipment—but it would not be sold off piecemeal in an auction. A rival, such as Telus, would likely buy BCE intact in bankruptcy and the proceeds would then be distributed to the above stakeholders before common shareholders get any proceeds.

      Note, though, that in the event of a BCE bankruptcy per se, common shareholders would likely get nothing.

      But, as I mentioned, there is virtually no chance it will go bankrupt. Why? Because it’s profitable, it’s generating huge cash flow, the interest on its debt is easily covered, dividends could be suspended to preserve cash, non-core units such as its Media interests could be sold off, and so on.

      Meanwhile, the various Debt Rating Agencies are not even remotely considering the possibility of a bankruptcy.

      For an investor, the actual risk is that BCE’s future earnings won’t be strong enough to support its current stock price—and that the stock price might fall.

      But as we mentioned, we think BCE is now undervalued, and it’s a buy.

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