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5 Reasons Dividend Investors Should Buy BCE Inc. Today

BCE Inc. (TSX:BCE)(NYSE:BCE) is pulling back with the broader market, and the weakness is giving investors a fantastic opportunity to start a position in one of Canada’s best dividend stocks. Here’s why the company deserves to be in your portfolio.

1. Limited competition

Once in a while, the market worries that a big international telecom company is going to set up shop in Canada. That’s unlikely to happen because the opportunity simply isn’t attractive enough to entice a new entrant to spend the money needed to effectively compete with the large incumbents.

Canada is a very big country.

A foreign company would have to invest billions of dollars to build a new network and then run the business at a loss for years in an effort to win over customers in a market that is relatively small by international standards. Think about it. The population of Canada is less than 36 million. Mexico City alone is home to 21 million. Even if a fourth major player emerges, BCE is so well entrenched that it would easily defend its stronghold.

2. Diverse revenue stream

BCE is no longer the boring old phone business it used to be. In recent years the company has become a media and communications powerhouse and now controls an impressive portfolio of assets all along the value chain. BCE owns sports franchises, radio stations, a television network, specialty channels, retail outlets, and a number of popular Internet properties.

When combined with the company’s state-of-the-art wireless and wireline network infrastructure, these assets form a competitive media and communications fortress. In fact, any time someone in Canada watches a TV program, listens to the news on the car radio, checks their e-mail, buys a digital device, sends a text to a friend, or downloads a movie, odds are that BCE is getting a piece of the revenue generated along the way.

3. Investment in infrastructure

BCE Inc. isn’t sitting on its hands and simply collecting fees. The company continues to invest heavily in its future and that should protect its leadership position in the market. Over the next five years BCE plans to spend $20 billion on expanding its broadband fibre and wireless networks. The Bell Gigabit Fibe service is already being rolled out to 1.1 million Toronto homes and businesses and will be available to 2.2 million homes by the end of 2015.

4. Strong earnings and free cash flow growth

BCE recently reported solid Q2 2015 numbers. The company delivered adjusted earnings per share of $1.71, a 5% increase over the same period last year. Free cash flow for the quarter increased 8%.

5. Dividend growth and safety

BCE pays a dividend of $2.60 per share that yields 5%. The company has a strong track record of increasing the distribution and that trend should continue in line with the growth in free cash flow. The company’s distribution falls within its target payout ratio of 65-75%, so investors can rest assured the dividend is safe.

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

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