Q: What do you think of BCE as of late being that their dividend payout is sitting at 160% of earnings and their growth is slowing?
Do you think a dividend cut is in the offing down the road or would they risk the share price hit on that move?
Do you think a dividend cut is in the offing down the road or would they risk the share price hit on that move?
5i Research Answer:
BCE has announced that it plans to reduce its dividend growth rate, but we would not expect it to cut its dividend. We think it will continue with its cost-cutting efforts, and if needed would sell assets to protect its dividend. We would not expect huge growth here, but lower interest rates should ultimately help the stock, and we would consider it a buy on more weakness for income investors. We prefer to look at cash flow rather than earnings when looking at payout ratios, because earnings can contain lots of non-cash charges. In 2023, BCE had $7.9B in operating cash flow and paid $3.6B in dividends, for a ratio of 45%.