BCE Inc.: Strong Growth, Great Dividend

BCE Inc (TSX:BCE)(NYSE:BCE) continues to be one of the best long-term investments for your portfolio. Skeptics of the company have long pointed to limited growth prospects and a higher payout level as reasons to limit exposure to the company, but there’s still plenty to love about BCE.

BCE’s empire has grown considerably over the years, to the point that it would be difficult to complete a typical day without traversing at least a few BCE assets. Apart from the core subscription services, BCE also has an immense media division, consisting of a group of radio and TV stations, as well as interests in professional sports teams.

In terms of results, Canada’s largest telecom provided a quarterly update recently that once again shattered expectations and silenced critics.

Q2 results: growth and more growth

In the most recent quarter, BCE reported operating revenue of $5.7 billion, surpassing the same quarter last year by 6.7%. That growth was primarily attributed to both the wireless and wireline segments, which saw a boost from the MTS acquisition that was completed earlier in the year.

BCE also realized adjusted net earnings of $792 million, or $0.88 per share, which were slightly lower than the same quarter last year. Cash flow from operating activities saw an increase of 14%, coming in at $2.15 billion, contributing to an impressive 17.1% increase in free cash flow, which finished the quarter at $1.09 billion.

When looking at the individual segments of the company, the wireless division continues to be the primary source of growth. BCE saw 88,611 new postpaid net additions to the wireless segment in the quarter, translating into an impressive 12.9% increase in revenue and a 12.8% increase in service revenue. Analysts were forecasting just 70,000 new subscribers for that segment.

The Wireline segment also realized growth in the quarter, registering growth of 4.8% higher than the same quarter last year, coming in at $3.12 billion. Higher ARPU which hit $67.28, as well as broadband internet and IPTV subscriber growth numbers helped propel service revenue up 5.3% to $2,882 in the quarter.

What do the results mean?

While the growth in the wireless segment and the significant opportunity it poses for the future are great, the broadband segment was notably weaker in terms of growth, managing only 17,000 new internet subscribers. To counter that, BCE is aggressively building out the Fibre network to reach as many homes as possible, and BCE believes that as Fibre expands to new areas, growth will continue.

Areas that lack Fibre service were also subject to aggressive promotions from competitor telecoms, which BCE also sees as being minimized as Fibre service and the benefits it brings customers is rolled out in larger numbers.

BCE plans to have Fibre connections to 3.7 million locations across seven provinces, including most of Toronto setup by the end of 2017.

Is BCE a good long-term investment?

There are plenty of reasons to consider BCE as an investment, particularly over the long-term. BCE’s massive infrastructure remains to be one of the most impressive defensive moats in the industry, which is being augmented by the growing footprint of BCE’s Fibre service.

In terms of a dividend payout, BCE has historically been viewed as a great option, and this isn’t going to be changing anytime soon. The current quarterly dividend of $0.72 amounts to a very impressive 4.86% yield, with a payout ratio falling in the range of 65% to 75%.

In my opinion, BCE remains a great long-term option for investors looking for both growth and income in a buy-and-forget package.

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Fool contributor Demetris Afxentiou has no position in any stocks mentioned.

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