Tuesday, April 19, 2011

BCE Inc 2

I first bought BCE (TSX-BCE) in 1982. I have only tracked this stock on Quicken from 1987 and since then I have had a return of 12.7% per year in total returns. This total return figure includes Nortel and Bell Aliant, both of which BCE has spin off over the years. It is hard to value the return from this stock. Not only has BCE spin-off other stocks, but they tended to do this at high prices.

When I look at the Insider Trading report, I find that the CEO sold off $43.7M shares. A number of directors bought shares to the tune of $4M. There is net selling of $39.7M. The CEO seemed to be selling off his options. All insiders, except directors have more options that stock. The CEO, after his sell off of options in March now has more shares than options.

Insiders often look at options as part of their salary. Unfortunately, this sell off tells us nothing about what the CEO thinks of this company. I guess it points out what sort of money the CEO is making and it is a lot. The company has shown confidence in the earning ability of BCE by their recent dividend increase of just over 13%.

If you are interested in purchasing any stock I follow, you can, at any time look at the spreadsheet to compare historical values to current values. For this stock, you will find Price/Earning (both forward and trailing), and Price/Book Ratios at Yahoo Canada. You should look at Key Statistics tab. Or, you can go to Globe and Mail at G&M. The Globe and Mail summary will give you P/E (Trailing), Forward P/E and the yield.

For Price/Earnings Ratios, I get a 5 year median low of 9.69 and a 5 year median high of 12.62. You can compare this to the Forward P/E on Yahoo and today it is 11.45. As you can see, it is between these two rates. You can also look at my P/E ratio for an Average of the H/L prices and this has a 5 year median P/E of 11.15. So you can see that the current P/E ratio for this stock is between the high and low marks and is close to the average.

On sites that give you a Trailing P/E Ratio (or use last 10 months of earnings to determine the P/E Ratio, you should compare this to my Trailing P/E Ratio. This is always the 2nd P/E Ratio that I show. On Yahoo today you can get a Trailing P/E Ratio of 12.37. I get a 5 year median Low Trailing P/E Ratio of 12.95 and a 5 year median High Trailing P/E Ratio of 17.05. Here you can see that the current ratio is just below my Low Trailing P/E ratio. Do not forget that the Trailing P/E Ratio is based on actual earnings. The Forward P/E Ratio is based on expected earnings.

I haven’t found any site that gives you the difference between the Graham Price and the current Price. However, you can find the Graham price on my site and do the comparison yourself. In this case, I get a current Graham price $35.75, which is very close to the current stock price of $35.46. You can see from my spreadsheet that, on average, the stock price is 13.87% above the Graham Price. So, this stock being close to the Graham Price is good.

Next, look at the Price/Book Value Ratio. Yahoo has a P/B Ratio of 1.85. I have a 10 year median P/B Ratio of 1.95. You can see that the current one is lower than the 10 year median ratio, so this shows a relatively good stock price. A really good stock price would have a P/B Ratio at 80% lower than the 10 year median ratio. For BCE, the difference is that the current P/B Ratio is 96% of the 10 year median P/B Ratio.

If you look at dividend yield, you will see that G&M gives a current one 5.6%. On my spreadsheet, I give a 5 year median yield on the Average H/L price of 5.45%. This shows that the stock price is just better than average and therefore a good price.

The next thing I look at is Analysts Recommendations. I generally look at the Globe and Mail site at G&M, The Daily Buy and Sell Adviser’s Morning Call, and the Financial Post Report, which I get via my broker. These sites you a good idea what is being recommended. To get comments of analysts, you can go to Stock Chase online. I also look at various analysts reports I have. Stocks Reports are available at Advise for Investors. Go to the “Research Tab”. Where it says “Buy-Sell Research Report”, insert the stock symbol. The stock symbol for this stock is “BCE”. Reports are often available for $4.95.

When I look at Analysts Recommendations, I see Strong Buy, Buy and Hold. There is more Strong Buy than Buy recommendations. However, there are an awful lot of Hold recommendations. The consensus recommendations would be a Hold. (See my site for information on analyst ratings.)

Even though my spreadsheets shows a relatively good current price, analysts giving Hold recommendations give a 12 month stock price between $35 and $37.50. They are giving Hold recommendations, as they do not expect much movement in price over the next 12 months. The analysts with Buy recommendations give their reason because of the good dividend yield. They think you should buy this stock for the dividends.

A number of blogs have recently mentioned this stock. The Dividend Ninja mentions BCE as a good one to invest in on April 15, 2011 and Passive Income Earner has a blog entry on BCE, dated April 14, 2011 and Loonie Bin talks about buying BCE on December 10, 2010.

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 here BCE. See my spreadsheet at 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 for stocks followed and investment notes. Follow me on twitter.

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