Things are looking good for the large telecommunication companies. Oil prices are holding energy stocks down, and no one really knows what to do with financials. Because of that, big money is looking to invest in safer, income-paying companies. BCE Inc. (TSX:BCE)(NYSE:BCE) is one of those safe companies.
The company is your typical telecommunications company offering services to residential and business clients. Whether clients want wireless, wired, Internet, TV, or a slew of other types of communication, BCE likely has its hands in the cookie jar.
The quarter was great for BCE. Its earnings per share were $0.72, which was a penny above analysts’ expectations. More important is the fact that the company increased its revenue year over year by $150 million.
What contributed to the company’s growth is the fact that it added more subscribers to its many different divisions. Wireless subscribers increased 2.4% to 8,118,628, TV subscribers increased 6.2% to 2,642,608, and high-speed Internet subscribers increased 5.1% to 3,297,026.
These increases led to a significant increase in the company’s free cash flow, which rose 23.6% to $833 million. Having that extra money is one of the primary reasons why BCE is such a great company to buy.
Free cash flow leads to dividends
There are some in the investment community who argue that BCE is one of the best dividends in Canada. It might be the highest, and it is by far the most secure. And it’s growing. Over the past six years, the company has increased its dividend 11 times.
During its quarterly call, BCE announced that it was increasing its dividend 5.3% to $2.60 per share. Along with that conversation, BCE also suggested that it would see an 8-15% increase in free cash flow. When that happens, I anticipate that the dividend is going to be hiked even more.
Good time to buy?
That’s a tough question actually. On one hand, I hate buying companies when they are so close to their 52-week high without at least some support to show for it. If it were to rise higher and then fall to this price point a couple of times, I would have more faith in its current price.
However, based on how the stock behaved on February 6, dropping nearly 4%, this might be a good price to start a position. And the simple fact is that BCE is making a lot of money, growing bigger, and really doesn’t have much competition. Therefore, I lean towards starting a position in BCE. It’s a solid investment with a really great dividend.
Fortunately for you, it’s not the only company that pays such an incredible dividend. There are many others out there that pay plenty of money to investors, and Motley Fool Canada has an amazing report that will show you the top three to look at.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Jacob Donnelly has no position in any stocks mentioned.