One of the basic fundamentals of good investing is making more money from the money you invest. Your household income or net worth could expand and grow over time through dividend investing. Canadians with a time horizon of 40 years can grow a $10,000 investment today tenfold to $100,000 on a dividend stock that yields 6%.
On the TSX, Canada’s largest telecommunications firm pays a generous 6.07% dividend. At $57.99 per share, your $10,000 can purchase around 172 worth of BCE (TSX:BCE)(NYSE:BCE) shares. You can’t go wrong with an industry leader that has a strong balance sheet and shows healthy growth. Its 15 consecutive years of dividend increases are mighty impressive too.
Pure-play income stock
BCE belongs to the TSX’s vaunted blue-chip companies. The wireless business of this dividend aristocrat generates nearly 50% of total cash flow. Likewise, it’s growing at a fast pace across the country. BCE’s annual expense on its wireless network runs in the hundreds of millions of dollars. The amount of CAPEX befits the company’s stature.
The $52.46 billion company generate reliable and robust cash flows because its wireless and residential operations are strong. BCE’s market-leading media assets also contribute to maintaining capital investment and sustaining profitable shareholder returns. Thus, BCE is nothing short of a pure-play income stock. Long-term investors should have it as a core holding in their dividend stock portfolios.
Diversified customer base
Since BCE’s three operating segments offer an extensive range of products and solutions, its diversified customer base gives it a competitive advantage. Bell Wireline is the top moneymaker and contributes the largest to revenues. (53% in 2020). Bell Wireless is a cash cow too (37%), while Bell Media accounts for nearly 10% of total revenues.
The solid customer base consists of retail consumers, businesses, and government clients. BCE pretty much provides all the communication needs of the private and public sectors in Canada. The company is also the winner in terms of market exposure. Its LTE wireless has a considerable footprint as it covers nearly 99% of the entire population.
In 2021, the ever-increasing demand for data and communication infrastructure are the tailwinds. Bell Wireless, in particular, is a high-margin business that’s growing at a rapid pace. Bell Media’s advertising revenue could resurrect by the second half of the year if economies reopened.
Latest quarterly financial results
For Q1 2021 (quarter ended March 31, 2020), BCE reported a 1.2% increase in operating revenues versus Q1 2020. According to BCE and Bell Canada’s CFO Glen LeBlanc, it was a promising start, notwithstanding the 6.3% decline in net earnings.
LeBlanc said BCE’s ongoing strong free cash flow generation is proof of the company’s strengthening performance. BCE ended the quarter with a $6.5 billion available liquidity. Robust sales of premium mobile phones and business telecom data equipment were the reasons for the 18.6% growth in product revenue.
The latest 2021 guidance from management is revenue and Adjusted EBITDA growth of between 2% and 5%. Thus far, BCE is on track to meet the estimates, including a free cash flow range from $2.8 billion to $3.2 billion. Over the last 45.35 years, BCE’s total return is 64,302.45% (15.33% compound annual growth rate (CAGR). The premier telco stock is for long-term investors, regardless of the investment amount.
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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 Christopher Liew has no position in any of the stocks mentioned.