Assessing the Sustainability and Growth of BCE Inc's Dividend Payments
BCE Inc(BCE, Financial) recently announced a dividend of $0.97 per share, payable on 2023-10-16, with the ex-dividend date set for 2023-09-14. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into BCE Inc's dividend performance and assess its sustainability.
Understanding BCE Inc's Business Model
BCE provides wireless, broadband, television, and landline phone services in Canada. It is one of the big three national wireless carriers, with its roughly 10 million customers constituting about 30% of the market. It is also the ILEC (incumbent local exchange carrier—the legacy telephone provider) throughout much of the eastern half of Canada, including in the most populous Canadian provinces: Ontario and Quebec. Additionally, BCE has a media segment, which holds television, radio, and digital media assets. BCE licenses the Canadian rights to movie channels including HBO, Showtime, and Starz. In 2022, the wireline segment made up 52% of total EBITDA, while wireless was 31% and media provided the remainder.
A Look at BCE Inc's Dividend History
BCE Inc has maintained a consistent dividend payment record since 1984. Dividends are currently distributed on a quarterly basis. BCE Inc has increased its dividend each year since 2008. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 15 years.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Decoding BCE Inc's Dividend Yield and Growth
As of today, BCE Inc currently has a 12-month trailing dividend yield of 6.80% and a 12-month forward dividend yield of 7.11%. This suggests an expectation of increase dividend payments over the next 12 months. BCE Inc's dividend yield of 6.80% is near a 10-year high and outperforms than 79.11 of global competitors in the Telecommunication Services industry, suggesting that the company's dividend yield stands out as an attractive proposition for income investors.
Over the past three years, BCE Inc's annual dividend growth rate was 5.10%. Extended to a five-year horizon, this rate stayed the same. And over the past decade, BCE Inc's annual dividends per share growth rate stands at 5.20%. Based on BCE Inc's dividend yield and five-year growth rate, the 5-year yield on cost of BCE Inc stock as of today is approximately 8.72%.
Evaluating Dividend Sustainability: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, BCE Inc's dividend payout ratio is 1.50. And this may suggest that the company's dividend may not be sustainable.
BCE Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks BCE Inc's profitability 7 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Examining Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. BCE Inc's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and BCE Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. BCE Inc's revenue has increased by approximately 0.10% per year on average, a rate that underperforms than approximately 66.49% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, BCE Inc's earnings increased by approximately -3.70% per year on average, a rate that underperforms than approximately 66.45% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -2.10%, which underperforms than approximately 68.72% of global competitors.
Concluding Thoughts
While BCE Inc's dividend performance and growth over the years have been commendable, the high payout ratio and underperformance in certain growth metrics raise concerns about the sustainability of its dividends. Investors need to carefully consider these factors alongside the company's profitability and growth prospects before making investment decisions. The high dividend yield, consistent dividend history, and solid profitability rank make BCE Inc an attractive proposition for income investors, but the sustainability of these dividends in the long run remains a question.
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