The current BCE dividend appears to be propping up the stock price.
Could you comment on the BCE payout ratio and how this recent acquisition changes that? Also book value?
How long can they could continue to pay the current dividend until the writing is on the wall and they have to cut?
Is this an emerging AQN? Purchase an overpriced second rate asset in the US to distract the buying pool from the actual deteriorating business situation.
This is a lot of stuff - however I am now taking a much more critical look at my other stocks.
Take as many points a needed.
Thank you
We think investors are better off looking at the payout ratio in terms of dividends/free cash flow (FCF) for businesses that are investing heavily like BCE. BCE’s dividend/FCF ratio before the acquisition was 108% (and this ratio has been unchanged in the last few years). The payout ratio after the acquisition is still uncertain but could go much higher given the capital intensity of the fiber business.
It is still early to call it an “emerging AQN”, but the capital allocation policy is certainly questionable, as BCE is expected to pay a much higher valuation for the acquisition than its own shares, consequently raising the capital intensity and debt level of the business substantially. BCE’s dividends could be maintained until at least FY2025, but its growth might be on pause until the debt is paid down. BCE’s story has changed, and the future prospects have become more uncertain than ever before. Investors could consider switching to something with a higher chance for dividend growth over time.