Q: noticed yesterday td action notes downgraded bce for the next year from 57 to55.
they also said they think that bce will only raise dividend 3% this year instead of the usual 15 year run of 5%. what is your thought and if this does happen do you think
some income investors will leave
they also said they think that bce will only raise dividend 3% this year instead of the usual 15 year run of 5%. what is your thought and if this does happen do you think
some income investors will leave
5i Research Answer:
BCE currently pays a 7.3% yield, is expecting low single-digits revenue growth and flat earnings growth over the next few years, and its free cash flow has been declining over the past few years. Over the past 12 months, its free cash flow is not sufficient to cover its dividends, and the company has issued debt to service these payments. Its debt-to-equity is climbing, and its net debt/EBITDA is high at 3.6X. Given the strength of the brand name, and other factors, we might see the company raise its dividend by 5%, but issue debt to accomplish this. If BCE only raises by 3% rather than 5%, there are likely some income-focused investors that will seek other sources of yield.