4 Reasons I Still Prefer BCE Inc.

BCE Inc. (TSX:BCE)(NYSE:BCE) may have its share of critics, but Canada’s largest telecom remains an excellent investment option.

| More on:
The Motley Fool

Are you invested in one or more of Canada’s telecoms?  The telecom sector is a crowded space, with the Big Three (arguably now the Big Four) telecoms vying for a share of your monthly income.

The telecoms are often compared, but ultimately they offer a very similar landscape for investors. BCE Inc. (TSX:BCE)(NYSE:BCE), however, makes a very compelling case for investors, owing to several factors that distinguish it from the rest of the pack.

BCE still runs a growing business

Say what you will about the “cut-the-cord” movement and the slow decline of the cable and wireline segments, but BCE is realizing some truly amazing growth from the wireless segment.

In less than a decade, the need for a wireless line has gone from a mere communications device to a must-have staple of modern society that has replaced upwards of 60 different things in our everyday lives, from alarm clocks to maps and radios.

The list of tasks that wireless devices can perform continues to grow by the day, which makes a wireless connection that much more of a necessity.

As the potential uses for wireless devices grow, so do the data needs of consumers. Industry pundits say that wireless data consumption continues to double with each passing year, which provides more revenue for wireless providers such as BCE.

As an example of this, in the most recent quarter, BCE added 68,000 net additions, representing an incredible 91.4% year-over-year growth. In terms of churn, BCE managed a fourth consecutive quarter of lowering year-over-year churn, which hit 1.13%.

BCE still has an impenetrable moat

One thing that investors often discount when reviewing BCE is the incredible moat that the company has, both in terms of infrastructure as well as in other ventures that provide a stream of revenue to the company.

Most investors know that BCE has a myriad of business ventures that contribute to the overall success of the company, but few realize just how extensive those ventures are, or how encompassing they are in our daily lives.

BCE has a very large and successful media arm that includes several TV and radio stations that provide much of our media coverage. In fact, most of us will, on a given day, either use BCE’s wireless network or consume media from a BCE-owned station without even realizing it.

BCE has growth potential

A lucrative mobile business and a strong moat aren’t reasons enough to invest in BCE. But an overwhelming opportunity for growth could be.

One of the most significant acquisitions by BCE in recent years was the AlarmForce deal, which was announced last year. While many investors were quick to dismiss the deal, there are some key points that will provide growth for BCE for at least the next few years.

In order to operate effectively, the AlarmForce offering requires an internet connection, which BCE conveniently offers. This creates a mutually beneficial relationship where the customers from one segment can become prospects for another.

Sign-on incentives, multi-year contracts, and even bundling AlarmForce service into an existing Bell Sympatico service contract no longer seem far-fetched or foreign.

BCE is still a dividend champion

Of all the reasons for investors to turn back to BCE, the impressive quarterly dividend the company offers continues to be near the top of the list.  An extremely impressive 5.60% yield is hard to ignore, as is the fact that BCE has been paying a dividend for well over a century.

If that isn’t compelling enough, in the most recent quarter the company maintained a goal of keeping payouts between 65% and 75% of free cash flow, with the company on target to realize a 5% or better uptick in the dividend later in 2018.

In my opinion, BCE is one of several great long-term holdings that should form part of nearly every portfolio.

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 Demetris Afxentiou has no position in any stocks mentioned.  

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »