BCE Inc 2

I own this stock (TSX-BCE). This was the first stock I bought and I bought some 50 shares in 1982. I added to the shares over time. I also had some BCE shares and still do in my RRSP account, which I did not talk about yesterday. I bought shares for my RRSP account in 1999. If I consider both my accounts and the spin-off and sale of Nortel and Bell Aliant, I have a return of 12.88%, with 7.64% from capital gain and 5.24% from dividends.

(My Total return depends on how quickly I sold off Nortel after I received it and I sold it quite early for the RRSP account, but later for my trading account. I therefore did better in my RRSP account than my trading account.)

When I look at insider trading report I find $24.9M of insider selling and $3.5M insider buying for a net of insider selling at $21.4M. Not only do insiders have things called “options”, but they have Performance-based Restricted Share Units, Restricted Share Units and Share Units. These other units are all shares given to insiders as part of pay. To me they are all options.

When I look at holdings, according to the insider trading report, the CEO has some $5.7M of common shares that he owns. However, he has options that are worth $76M at current stock price. Everyone but directors have more options than shares. The current insider selling is by the CFO and officers of the company.

There are some 536 institutions that own 52% of the shares of this company. Over the past 3 months they have bought and sold shares and now have a few less shares (selling less than 1% of outstanding shares).

I have 5 year median low and high Price/Earnings Ratios of 11.07 and 13.74. The current stock price of $40.08 has a P/E ratio of 12.68. The 5 and 10 year median Price/Earnings Ratios are 12.41 and 12.88. This makes the current price a reasonable one.

I get a Graham Price of $31.27. The low difference between the Graham price and stock price is the stock price 5.3% lower than the Graham Price. The median and high difference between the Graham Price and stock price is the stock price being 14% and 32% higher than the Graham Price. So the current price is not as high as it has been, but it is above a median price.

I get a 10 year median Price/Book Value Ratio of 2.09 and a current P/B Ratio of 2.91. This shows that the current stock price is high. Part of the problem is the decrease in Book Value because of the new accounting rules.

The last test and the most important one is the dividend yield. The current dividend yield is 5.4% and the 5 year median is 5.3%, which is almost 2% lower. This shows that the current price is reasonable or slightly better than the median price over the past 5 years.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. Because there are so many Hold recommendations, the consensus recommendation would be a Hold. The reason for the Hold recommendations seems to be that no one expects the stock price to change much over the next 12 months. There is a worry about future profits due to competition, not only from cable but also from VoIP. (VoIP is voice over internet protocols; think of Skype.)

The Buy recommendations talk about the 5% dividend and think it is a buy and hold for the 5% yield and future growth in dividends. Even the Buy recommendations mention that they do not expect much in capital gain from this stock. They just like the 5% dividend.

This has been a common refrain recently. With interest rates so low, investors are looking for better income and they are buying dividend paying stock for the yield and nothing else. Personally, I like buying dividend paying stock for yield and capital gain. I worry about the future of Telecom company’s earnings because Canadian Telecom rates are so high. If this changes, our Telecom companies will not earn as much or would have to be more efficient. The government seems to be changing the rules for Telecom to allow more competition.

Bell has a friendly takeover of Astral Media (TSX-ACM) in the works and most feel that the deal will close and be good for BCE. There is an article in the G&M on this purchase.

Cash Money has written a January 2012 blog on Canadian Telecoms. The blogger site of dividend stock online has a September 2011 article on Canadian Telecoms.

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.