BCE Inc. (TSX:BCE)(NYSE:BCE) has undergone a major transition in recent years, and some investors wonder if the current business model makes the company more risky in a rapidly changing environment.

Let’s take a look at BCE to see if it still deserves to be an anchor-holding in your dividend portfolio.


Once in a while the government tries to convince the public that a large competitor is planning to enter the market. When that happens, Canadian telecom stocks normally slide, and savvy investors swoop in to do some bargain hunting.

On the surface, the idea of having a new national competitor makes sense because BCE and its peers dominate the market, and Canadians think they would see lower bills if a new entrant stormed in. But the reality is this: no large international company is interested.

Here’s why.

Canada is a very large country with a small population. That means an international company would have to invest billions of dollars to build a national network, and then offer unprofitable pricing for several years in order to build a large enough customer base to make the business viable. In the end, there is no guarantee it would work out.

That’s why we haven’t seen a major new entrant step up to the table, and there is little chance one will come. Consumers might not be happy, but shareholders are beaming with delight.

Business model

BCE has transformed itself from a simple wireline telephone company to a media and telecom powerhouse. Through a series of strategic acquisitions, the company has amassed an asset portfolio that includes sports teams, radio stations, a TV networks, specialty channels, websites, and retail outlets.

When combined with BCE’s world-class wireline and wireless network infrastructure, you get a company that dominates the Canadian market all along the value chain.

If a new national competitor were to eventually emerge, BCE is so well entrenched now that it would be very tough to beat.

Cash flow

BCE generates a lot of cash. In the second-quarter earnings statement the company reported an 8% year-over-year gain in free cash flow. Adjusted net earnings increased by 5%.

The company has a lot of moving parts and it will take time for the entire machine to work in perfect harmony, but the company is not suffering along the way, and shareholders are still being looked after.


BCE pays a dividend of $2.60 per share that yields 4.8%. The company has a solid track record of increasing the payout, and investors should see steady increases in the years to come as free cash flow continues to grow.

Should you buy BCE?

The dividend is very safe and offers a yield that is comparable to the big banks. If you want a dividend pick that you can simply buy and hold for decades, BCE is a solid choice right now.

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Fool contributor Andrew Walker has no position in any stocks mentioned.