Sound bite for Twitter and StockTwits is: Dividend Growth Telecom. I have done well over the years, but this stock is currently a very small percentage of my portfolio when in the past it was a big percentage. It is one of 3 stocks I started out with. I am not as interested in Telecom stocks as I used to be. Telecom's seem to be making money currently, but you have to wonder if this will last. See my spreadsheet at bce.htm.
I own this stock of BCE Inc. (TSX-BCE, NYSE-BCE). This is one of first stocks I bought, which was in 1982. At that time is was called an orphan and widow stock. It is not easy to figure out what I have earned on this stock because it has spun off shares for Nortel and Bell Aliant. The annoying thing with their spin offs is you always end up with an odd number of shares.
This is considered to be a dividend growth stock. The dividends have grown by 9% and 7.3% per year over the past 5 and 10 years. However, there have been many years in the past history of this stock when the dividends have not increased. In fact there has been past stretches with no dividend growth at all.
When I first bought this stock in 1982, dividends were yielding around 6% and the increases were between 1 and 3% per year. I cannot reconcile yet my old historical prices for BCE with historical prices given for BCE stock by websites. The Nortel spin-off gave basically a 30% to 70% split of BCE and Nortel, but dividends for BCE only decreased by just under 12%.
The Dividend Payout Ratio for 2014 for EPS is 82% and the CFPS is 31%. The 5 year median DPR for EPS is 71% and for CFPS is 30%.
I have been tracking my shares in Quicken since 1987. Since then I have a total return of 9.49% per year with 3.38% per year in capital gains and 6.11% per year in dividends. Over this period, Nortel was spin-off in 2000 and Bell Aliant was spin-off in 2006. This is not a bad return over a 27 year period. This return includes Nortel and Bell Aliant spin-offs. There was a big problem with Nortel's spin-off as Nortel soared in 2000 bull market, but then totally crashed later. Nortel was crashing at the time of the spin off and it all happened very quickly.
If you look at the 5 and 10 year total return on this stock it is at 14.33% and 11.58% per year. The portion of this return attributable to dividend is 5.53% and 4.71% per year. The portion of this return attributable to capital gain is 8.80% and 6.87% per year.
Outstanding shares have increased by 1.3% and decreased by 1% per year over the past 5 and 10 years. Revenue growth is low to moderate. EPS growth is moderate. Cash Flow growth is low to moderate. Growth is better over the past 5 years than for the past 10 years.
Revenue has grown at 3.5% and 1% per year over the past 5 and 10 years. Revenue per Share has grown at 2.2% and 1.9% per year over the past 5 and 10 years.
EPS growth is at 7.1% and 6.1% per year over the past 5 and 10 years. Cash Flow has grown at 6.5% and 1.8% per year over the past 5 and 10 years. CFPS has grown at 5.2% and 2.8% per year over the past 5 and 10 years.
The Return on Equity was below 10% only twice in the past 10 years and that was in 2008 and 2009 when ROE was 5.1% and 9%, respectively. The ROE for 2014 was 15.5% and the 5 year median is 15%.
However, the ROE on comprehensive income is not as good and the 2014 ROE was 12.2% and the 5 year median value was 11.8%. The ROE on comprehensive income was below 10% at 9.9% in 2011 and 2012. The low ROE on comprehensive income suggests that the earnings may not be of good quality.
The debt ratios are mediocre. The Liquidity Ratio is just 0.50 in 2014. If you add in cash flow after dividends, then the ratio is 1.09. If you exclude the current portion of the long term debt the ratio is 0.85. If you then again added in cash flow after dividends, the ratio is 1.85. It is clear that the company relies on cash flow to cover current liabilities.
The Debt Ratio is 1.49 in 2014. I would prefer it to be at least 1.50, so it is just under the wire. However, the 5 year median ratio is better at 1.56. Leverage and Debt/Equity Ratios are 3.04 and 2.04 for 2014. These ratios are also a little higher than other telecoms I follow. They were better last year at 2.79 and 1.79.
This is the first of two parts. The second part will be posted on Monday, April 13, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.
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.
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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Would you still consider initiaing a long position at 54/share?
ReplyDeleteIf I was starting out again, I would not have BCE as my first stock. I would worry about a shakeout in this industry. So I would not consider this stock.
ReplyDeleteI personally do not think that telecoms are particularly cheap. However, it also depends on if you are buying short term or long term.