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RRSP Investors: Does BCE Inc. Deserve to Be a Top Pick?

Canadians are searching for reliable stocks to hold inside their self-directed RRSP accounts.

Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) to see if it deserves to be in your portfolio.

Steady results

BCE reported Q1 2017 adjusted earnings per share of $0.87 compared to $0.85 in the same period last year.

Revenue rose 2.2% year over year, supported by 7.1% growth in the wireless division. Wireline revenue came in flat, and Bell Media saw revenue increase 1.3%.

BCE generated $489 million in free cash flow in the first three months of the year, representing a 17% increase over Q1 2016.

Wireless postpaid net additions came in above 35,000 in the quarter. Blended average revenue per user (ARPU) rose 4.2% to $65.66.

On the wireline side, Bell TV added more than 22,000 net new Fibe TV subscribers. High-speed internet net additions totaled 15,000.

BCE said churn increased in the quarter as a result of aggressive bundle promotions from cable competitors.

Bell Media’s revenue gains came as a result of growth in Crave TV, the expansion of The Movie Network across Canada, and contract renewals with TV distributors.

Overall, things look pretty good.

Acquisition

BCE closed its purchase of Manitoba Telecom Services (MTS) in March. The deal moves BCE into top spot in the Manitoba market and provides the company with a strong base to expand its presence in the western provinces.

2017 guidance

As a result of the addition of MTS, BCE adjusted its projections for 2017. The company expects revenue growth of 4-6% and free cash flow growth of 5-10%.

Adjusted earnings are expected to be $3.30-3.40 per share.

Dividend

BCE recently increased its quarterly dividend by 5.1% to $0.7125 per share. That’s good for a yield of 4.7%.

Should you buy?

BCE’s vertically integrated structure means the company gets a piece of the action all along the Canadian communications value chain.

In fact, any time someone in this country makes a call, sends a text, watches the news, listens to the weather report, checks e-mail, or downloads a movie, the odds are pretty good that BCE is involved somewhere along the line.

That’s a powerful business.

Growth isn’t robust, but the dividend is rock solid, and investors who have a buy-and-hold strategy should do well over the long term, while collecting the above-average yield.

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

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