MENU

Fool Canada’s first 1,000%+ winner?

Our Chief Investment Advisor, Iain Butler, and a team of The Motley Fool’s most talented investors from across the globe recently embarked on an unprecedented mission:

To identify the 20 Canadian small-cap companies they believe have the best shot at earning investors like you gains of 1,000%+ over the coming years.

For the next few days only, you can get the names and full details on these 20 potential “10-baggers” when you join Iain and his team in a first-of-its-kind project they have dubbed Discovery Canada 2017.

BCE Inc.: Could This Stock Hit $70?

BCE Inc. (TSX:BCE)(NYSE:BCE) has been a top performer for the past seven years, and investors who missed the impressive rally are wondering if more upside is on the way.

Let’s take a look at Canada’s telecom giant to see if it deserves to be in your portfolio.

Earnings

BCE just reported adjusted Q1 2016 earnings of $0.85 per share, up slightly from the same period last year.

Wireless revenue rose 3.4% on the back of subscriber growth and a higher postpaid subscriber mix combined with a 3.6% increase in blended average revenue per user. Customers are consuming more data as usage of the company’s leading 4G LTE networks increases.

The wireline division generated positive EBITDA growth for the seventh consecutive quarter. Revenue slipped 1.5% compared with Q1 2015 as slow economic growth and competitive pricing pressures impacted the business market.

Residential services fared better. The company’s Fibe TV roll out continues to be a success with 24.3% more customers using the service in Q1 2016 compared with the first quarter last year.

The high-speed Internet customer base increased 3.4% year over year.

BCE has ramped up its media division in recent years and now holds a wide range of assets, including professional sports teams, a television network, radio stations, and specialty TV channels.

Media revenue rose 2.1% in Q1 2016 compared with the first quarter last year. The division continues to adjust to the rapidly changing market, and getting all of the parts working together in a way that minimizes costs and maximizes revenue will take some time. Revenue from the group now accounts for 12% of the company’s overall sales.

The appeal of the media division is that it strengthens BCE’s competitive position in the overall Canadian marketplace and gives the company a foothold at all points in the media and communications value chain.

Outlook for 2016

BCE is on track to deliver $3.45-3.55 in adjusted earnings per share. Free cash flow growth is expected to be 4-12%, and the company remains within its payout-ratio target of 65-75% of free cash flow.

Could the stock hit $70?

The shares are already trading just shy of the $60 mark. Revenue growth is expected to be 1-3% this year and adjusted EBITDA growth will be 2-4%, so there isn’t a big catalyst on the revenue side to justify another 15-20% surge in the share price in the near term.

However, BCE continues to pay a big dividend, and growth in the payout should continue in line with improvements in free cash flow. With a yield of 4.6% and a business that is relatively immune to the volatility of the broader market, BCE continues to attractive safe-haven investors and yield seekers.

As long as interest rates remain low, BCE’s multiple could continue to creep up, and $70 isn’t out of the question over the next couple of years.

Should you buy?

BCE is a dominant company in an industry with few competitors, and that situation is unlikely to change. The stock isn’t cheap, but you get a rock-solid business with great yield. At the moment, comparable picks are few and far between.

Urgent update: Motley Fool issues rare "double down" stock alert

Not to alarm you but you recently missed an important and rare event. Stock Advisor Canada issued a "double down"... and history suggests it pays to listen. Because 10 of the most lucrative "double downs" in one of the Motley Fool's premier services skyrocketed an average of 434%! So, simply click here to discover why Motley Fool "double downs" have some investors rocking with excitement. Five years from now, you'll wish you'd grabbed this stock. Click here to learn more.

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

NEW! This Stock Could Be Like Buying Amazon In 1997

For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Stock Advisor Canada’s Chief Investment Adviser, Iain Butler, also recommended this company back in March – and it’s already up a whopping 57%!

Enter your email address below to find out how you can claim your copy of this brand new report, “Breakthrough IPO Receives Rare Endorsement.”

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.