Q: My question pertains to the risk associated with BCE. It is often recommended as a good dividend stock (which it definitely is). However, when I buy dividend stocks, I am equally looking for safety in my investment. The following are few notes:
• The share price is lower than it was 10 years ago.
• In a response to Nick on April 3 you mentioned “the dividend in FY2023 was $3.7B, which is covered by a cash flow of $7.9B,” (which aligns with the Operating Cash flow). Looking at the FY2023 report “https://bce.ca/investors/AR-2023/2023-bce-annual-financial-report.pdf” (page 20) they mention that their dividend payout policy is to fall in the range of 65-75% of free cash flow and that their payout in 2022 was 108% and in 2023 111%. I would think that this may be a better gauge as their capital requirements appear to be regularly high, and a number exceeding 100% may not be sustainable for long.
• Their level of debt appears to be very high.
• Their revenues have had minimal increase year over year and their net earnings declined quite dramatically.
• I understand they are trying to turn things around but are heavy regulated.
What is your opinion considering the above, your understanding of the situation and the current share price which appears to be historically low (offering an incredible dividend).
Would you be a buyer of the stock? Thank You!
• The share price is lower than it was 10 years ago.
• In a response to Nick on April 3 you mentioned “the dividend in FY2023 was $3.7B, which is covered by a cash flow of $7.9B,” (which aligns with the Operating Cash flow). Looking at the FY2023 report “https://bce.ca/investors/AR-2023/2023-bce-annual-financial-report.pdf” (page 20) they mention that their dividend payout policy is to fall in the range of 65-75% of free cash flow and that their payout in 2022 was 108% and in 2023 111%. I would think that this may be a better gauge as their capital requirements appear to be regularly high, and a number exceeding 100% may not be sustainable for long.
• Their level of debt appears to be very high.
• Their revenues have had minimal increase year over year and their net earnings declined quite dramatically.
• I understand they are trying to turn things around but are heavy regulated.
What is your opinion considering the above, your understanding of the situation and the current share price which appears to be historically low (offering an incredible dividend).
Would you be a buyer of the stock? Thank You!
5i Research Answer:
BCE’s valuation multiple has been at its lowest since 2013, BCE's Forward P/E is around...