BCE Inc 2

I am today reviewing this stock, (TSX-BCE) because it has published its fourth quarterly results. I am using their unaudited statements for December 31, 2009. BCE was one of the first stocks I bought. This stock is hard to get a long term rate of growth. The main problem is that in 2000 they split off their investment in Nortel. At that time, Nortel’s and also BCE’s stock price was very high. I sold off half of Nortel at a very good price and half at a very low price. If I put BCE and Nortel together in Quicken, I get a long term return of 12.7% per year since 1987. 1987 is the year I started to track my investments on Quicken.

The most encourage thing is there is insider buying. Over this last year, Insider Buying totaled just over $1M. There is also Insider Buying under the company’s ownership plan. There is no Insider Selling that I could see. The other think that shows the company has faith in the immediate future of this company is the rise in dividends. Around the time that this company was to go private in 2008, there was a decrease in total dividends as only two dividends, instead of 4 were paid in 2008. However, since that time there has been two dividend increases. This is certainly better than a lot of other company’s have managed during our recent difficulties.

When I look at the 5 year average P/E low, I get a ratio of 12 and for the 5 year average P/E high, I get 18. Currently, the P/E is 11, based on expected earnings for 2010. Sites that base current P/E on the latest 12 months earnings get a P/E of 14. I feel that a P/E of 11 is both good from an absolute view and from a relative view. When I look at the Price/Book Value ratio, I see that it is less than 70% of the long term average. Also at 1.34, it is low.

Next, I want to look at dividend yield. The current yield is 5.9% and the 5 year average is 4.6%. So on this basis, the current yield is good. The last thing I like to check is the Graham Price. I get a current Graham Price of $36.28. The current price of $29.18 is some 24% below this Graham Price. I probably should point out, again, that the P/E and Graham Price are based on an estimate of 2010 earnings. Estimates can be wrong. Both the P/BV and the dividend yield are based on actual current values and therefore are more reliable. If you look at all this stuff, it would appear the current stock price is good.

When I look at analysts’ recommendations, I find them at Strong Buy, Buy, Hold, Underperform and Sell. So, analysts’ thoughts about this stock run the whole gamete. There are lots of Strong Buys, Buys and Holds. I only find a couple of Underperform and one Sell. The consensus is probably a Buy, but I do not think that you can ignore the large amount of Hold recommendations, nor the huge diversity of opinion on this stock.

What a lot of analysts like is the dividend. They believe that now the buyout is done with, BCE will go back to the practice of raising their dividends on a regular basis. People really seem to like George Cope and feel that BCE will very well under him. The main problem cited is wireless competition, both for BCE’s landlines and current or possibly future wireless rivals.

BCE is Canada's largest communications company, providing the most comprehensive and innovative suite of communication services to residential and business customers in Canada. Operating under the Bell and Bell Aliant brands, the Company's services include Bell Home phone local and long distance services, Bell Mobility, Virgin Mobile and Solo Mobile wireless, high-speed Bell Internet, Bell TV direct-to-home satellite and VDSL television, IP-broadband services and information and communications technology (ICT) services. Its web site is www.bce.ca/. See my spreadsheet at www.spbrunner.com/stocks/bce.htm .

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.