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BCE Inc.: The Foundation for Your Income Portfolio

For investors that are looking for a long-term buy-and-hold stock for their income portfolios, there are few stocks that can provide as powerful a foundation as BCE Inc.  (TSX:BCE)(NYSE:BCE).

But why is BCE such a great income stock? A few reasons stand out.

Multiple touch points

The business has multiple touch points with its customer’s lives through its core offerings of internet, wireline, wireless, and TV subscription services. But it doesn’t stop there.

It also has a massive portfolio of media assets, including a vast network of television stations, radio, websites, etc. It even has equity in the Montreal Canadiens, and it owns 37.5% of Maple Leaf Sports & Entertainment Ltd., which owns the Toronto Maple Leafs, Toronto Raptors, and Toronto FC.

This means that an individual might watch a Toronto Raptors game using the television subscription provided by Bell and be on the internet reading about the latest sports rumours. Each of those points generates revenue for BCE.

Company growth

In its Q1 2017 earnings report, the company reported adjusted earnings per share of $0.87 versus $0.85 in Q1 2016. Its revenue grew by 2.2% thanks to the 7.1% increase in its wireless division and the 1.3% increase in Bell Media.

There were a few key numbers to look at in the report. First, churn increased in the quarter. Churn is the percentage of customers that leave. The lower this is, the better for the company. BCE blames aggressive marketing from some of its competitors. I’m actually okay with this because it means that BCE is not chasing every last dollar, which devalues its offerings.

The other number worth looking at is the average revenue per user. This increased by 4.2% to $65.66. That’s a sizeable increase and is a big reason earnings were also up.

On the growth end, I expect more thanks to the company’s acquisition of Manitoba Telecom Services (MTS). We should get a better idea of the impact of this acquisition over the next few quarters, but it is estimated that it will result in $100 million in combined pre-tax annualized opex and capex synergies. Further, MTS adds 229,000 internet subscribers, 109,000 IPTV subscribers, 477,000 wireless subscribers, and 420,000 network access services.


The third reason BCE is such a great income stock is because of the dividend. It currently yields 4.83%, which is good for $0.72 per quarter. Earning $2.88 a year in dividends is really lucrative, and it can be the foundation for any income portfolio.

For example, let’s assume you’ve invested $10,000 in BCE. After the first year, you’d earn $484.60 in dividends. By rolling that back into the company (or into other stocks), you can see how your income portfolio can begin growing.

Going forward, I expect management to increase the dividend, which will make your yield on cost even better.

What to expect

Ultimately, BCE is not going to be a fast-moving company. This is about income. The good news is, because the company doesn’t see rapid changes in price, you can scale in to your position as new cash becomes available without worrying about paying too much for your shares. For those that need a strong, secure foundation stock for their income portfolio, BCE is the way to go.

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Fool contributor Jacob Donnelly has no position in any stocks mentioned.

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