Friday, March 29, 2019


Sound bite for Twitter and StockTwits is: Dividend Growth . Stock price is relative reasonable to expensive. It is above the median. Vulnerability is in high DPR for EPS and Liquidity Ratio. See my spreadsheet on BCE Inc.

I own this stock of BCE Inc (TSX-BCE, NYSE-BCE). This is the first stock I bought. At that time is was called an orphan and widow stock. I bought this stock in 1982 and have held it ever since. Since I bought it both Nortel and Bell Aliant were spin off. The problem with BCE's spinning off part of the company was that I ended up with an odd number of shares. It is annoying.

When I was updating my spreadsheet, I noticed Revenue is not growing very well. The Dividend Payout Ratio is growing too high. For 2018 it is 96%. Analyst do expect do expect it to come down over the next few years. I also find it ridiculous that the BCE site is not secure. Almost all the stocks I follow have secure sites and this is supposed to be a technology company.

Dividends are moderate (2% to 4% range) to good (5% or better). The current dividend is good at 5.34%. The 5, 10 and historical median dividend yields are 4.73%, 5.17% and 4.63%.

The dividend growth is low except for over the past 10 years, when growth per year is 15.11%. However, that is because exactly 10 years ago, the company only paid 2 dividends because it expected to be bought out. The buyout did not happen. If not for that one year, the 10 year growth would be 7.4% per year instead.

The Dividend Payout Ratios are for EPS are currently quite high. The DPR for 2018 for EPS is 96% with 5 year coverage at 87%. The DPR for CFPS for 2018 is better with the 2018 ratio at 31% and 5 year coverage at 34%

Debt Ratios are fine, but there is a vulnerability in the low Liquidity Ratio. The Long Term Debt/Market Cap Ratio is 0.41 and it is fine. The Liquidity Ratio is low at 0.56 which means the current assets cannot cover the current liabilities. The 5 year median is also low at 0.57. However, if you add in cash flow after dividends, the ratio is 1.14. If you add back in the current portion of the long term debt, the ratio is 2.05. The Debt Ratio is fine at 1.57 with 5 year median at 1.56. Leverage and Debt/Equity Ratios are fine at 2.76 and 1.76 respectively. Their 5 year median ratios are 2.78 and 1.78.

The Total Return per year is shown below for years of 5 to 36 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.

First of all, I know that TD WebBroker has different stock prices went you go out as far as I do. I do not know why except their chart does not seem to adjust for the Nortel spinoff. When BCE did spin offs, I always ended up with odd number of shares. Other companies give even board lots, but not BCE. That was a pain. Also, the spin-off of Nortel happened almost at the top of the 2000 bull market and therefore was spun-off at a very high price.

However, I have had this stock for 31 years in Quicken and my total return is 12.71%. I have added in the spin-off of both Nortel and Bell Aliant and my sale of these spin-offs. I sold Aliant soon after the spin-off and suffered a small loss. For Nortel, I had that in two accounts. I sold it in my RRSP soon after the spin-off and at a good price. I sold the rest 2006 and at a very low price.

From Years Div Gth Tot Ret Cap Gain Div
2013 5 5.20% 8.72% 3.23% 5.49%
2008 10 15.11% 14.45% 7.94% 6.51%
2003 15 6.26% 8.98% 4.25% 4.74%
1998 20 4.66% 3.45% 0.28% 3.18%
1993 25 3.77% 8.82% 3.96% 4.85%
1988 30 3.46% 9.39% 4.05% 5.34%
1983 35 3.42% 10.13% 4.15% 5.98%
1982 36 13.35% 5.18% 8.17%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 16.41, 17.95 and 19.48, the corresponding 10 year median ratios are 15.67, 17.14 and 18.61. The corresponding historical median ratios are 14.12, 16.19 and 17.12. The current P/E Ratio is 17.78 based on a stock price of $59.37 and 2019 EPS estimate of $3.34. This stock price testing suggests that the stock price is relatively reasonable and around the median.

I get a Graham Price of $37.00. The 10 year low, median, and high median Price/Graham Price Ratios are 1.42, 1.55 and 1.67. The current P/GP Ratio is 1.60 based on a stock price of $59.37. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 3.09. The current P/B Ratio is 3.26 based on Book Value of $30,689M, Book Value per Share of $18.21 and a stock price of $59.37. The current P/B Ratio is some 5.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get an historical median dividend yield of 4.63%. The current dividend yield is 5.34% based on dividends of $3.17 and a stock price of $59.37. The current yield is some 15% above the historical median. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The 10 year median Price/Sales (Revenue) Ratio is 1.85. The current P/S Ratio is 2.23 based on 2019 Revenue estimate of $23,956, Revenue per Share of $26.67 and a stock price of $59.37. The current ratio is some 20% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. But it is just within the expensive range which starts at 20%.

Results of stock price testing is stock price is probably reasonable to expensive. It is certainly above the median. I think that the P/B Ratio of 3.09 and 3.26 to be rather high ratios. Book Value is not growing well. Book Value is basically the breakup value of the company. This is the problem with the P/B Ratio test. A problem with the dividend yield test is the very high Dividend Payout Ratio for EPS. It is revenue that pushes future earnings, cash flow and dividends. It cannot be ignored. However, the P/S Ratio test shows that the price is expensive, but it is just over the line. The 12 month consensus stock price points to a current high price also.

When I look at analysts’ recommendations, I find Strong Buy (4), Buy (5), Hold (9) and Underperform (2). The consensus would be a Buy. The 12 month stock price is $59.56. This implies a total return of 5.66% with 0.32% from capital gains and 5.34% from dividends based on a current stock price of $59.37.

See what analysts are saying about this stock on Stock Chase . They generally like this stock. This stock is a current pick for Andrew Walker on Motley Fool. A writer on Simply Wall Street talks about the companies P/E Ratio. The blogger Dividend Hawk talks about BCE recent dividend raise. Tyler Harlow on Z Tribune talks about recent US ratings on this stock.

BCE, through its Bell brand, is both a wireless and Internet service provider, offering wireless, broadband, television, and landline phone services in Canada. It is one of the big three national wireless carriers. Its web site is here BCE Inc.

The last stock I wrote about was about was AltaGas Ltd (TSX-ALA, OTC-ATGFF) ... learn more. The next stock I will write about will be Sun Life Financial Inc. (TSX-SLF, NYSE-SLF) ... learn more on Monday, April 1, 2019 around 5 pm.

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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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