Q: what do you make of bce stating that it will not raise its dividend in 2025 but goes and buys a company for 5 billion dollars instead of working on debt repayment.
do you think this is a good idea?
do you think this is a good idea?
5i Research Answer:
We do not mind the acquisition itself. It adds 1.3 million fibre locations, giving it is a nice foothold in the US, and its recent asset sales will help cover the costs. It increases its scale and presents better growth opportunities. BUT...it is the timing that is questionable. BCE is trying to cut costs, and investors are concerned about its debt and dividends. It was on the right track and now suddenly it has taken a different turn. The news on not increasing the dividend has not gone over well with investors. Management was regaining credibility and now is at risk of losing it again. Overall, we would have passed on this deal, or delayed it (the latter of course may have not been possible).