BCE Inc. (TSX:BCE), Canada’s leading telecommunications company, may seem boring to some investors. I can see why some may believe this in a world of high-flying stocks and quick gains. But, there’s something about the consistency and predictability of BCE stock that actually makes it a great investment. In time, this brings with it a level of wealth creation for those investing in it.
Let’s explore.
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An almost 7% dividend yield
BCE stock is currently yielding a very attractive 6.91%. This means that investors who invest in this stock get the benefit of a high yield that is usually reserved for far more risky companies.
So, if you invest $39,000 to buy 700 shares of BCE stock at today’s price of $56 on the TSX, you will receive $2,710 in yearly dividend income. This income is an invaluable part of BCE’s value proposition – it usually takes accepting a much higher risk level to get our hands on that kind of yield.
BCE stock has a strong track record
When I say that BCE stock has a strong track record, I am referring to a multitude of things. Firstly, we have BCE’s dividend history. With 40 years of dividend payments under its belt, and a 5% or higher dividend increase in each of the last 15 years, BCE has an enviable dividend track record. This reliability and consistency are extremely valuable assets for investors. It gives security and safety, which is especially attractive in today’s trying times.
Secondly, BCE’s financial performance has been strong throughout its history, generating strong returns for both the company and its shareholders. And this makes sense, as BCE’s business is a relatively steady and predictable one, with ample cash flows, a strong competitive position, and a wide moat protecting it from competition. BCE’s long-term stock price performance reflects all of this.
BCE boasts an unmatched network, with the fastest and farthest-reaching broadband internet connection. Also, BCE has a leading position in fibre optics, which is expanding rapidly, as well as in 5G, which is on track to grow to 85% penetration in Canada. All of this will ensure that the company maintains its edge for years to come.
Recent results continue to show BCE’s strength
Despite the many economic challenges that have befallen the Canadian economy in 2023, BCE continues to show its strength. The company has $620 million in cash on its balance sheet, as well as over $4 billion of available liquidity.
Also, BCE continues to post strong results, with the cash flow generating power of its business on full display. In fact, in the first nine months of 2023, BCE reported cash flow from operations of $5.6 billion. It also generated free cash flow of $1.8 billion, which translates to a healthy 10% of revenue. For the full year of 2023, management expects free cash flow growth to continue.
The bottom line
BCE stock continues to be a perfect anchor stock for Canadian’s portfolios. The company remains committed to dividend growth of at least 5% per year. It also remains committed to improving Canada’s telecom networks to provide better, faster service to Canadians, thereby maintaining its lead.
