BCE (BCE) Has Room to Grow in the Great White North - Barron's (T, VZ, RCI, TU)
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BCE (NYSE: BCE) shares similar qualities to the U.S.'s AT&T (NYSE: T) and Verizon Communications (NYSE: VZ), but has more room to stretch out in Canada, according to Barron's.
The company has a nice dividend yield of 5.7%, good cash flow, and a strong foothold. The company serves land-line customers in Eastern Canada, and its affiliate, Bell Aliant, caters to Ontario and Quebec.
Wireless subscribers increased 5% in 2009 to $6.8 million.
The company has also began to dabble in high-speed internet and video services, much like Verizon.
BCE was scheduled for a buyout in 2007 for C$42.75 per share, but the deal was dropped when financing became much more challenging thanks to the credit crunch of 2008. The company picked up a great CEO in Geoge Cope when the buyout was still in the air [he was a CEO at the age of 26, and has been in the Canadian telecommunications industry for more than 20 years].
Wire-line-labor costs have dropped 9% last year and general and administrative expenses also declined 10%. With that amount of cost savings, its no wonder that their earnings grew 11% for FY09.
The company also sees FY10 EPS of about C$2.65 - C$2.75, up from the C$2.50 last year. Both Verizon and AT&T are expected to have a flat to down EPS for FY10.
The company sees free cash flow to increase to C$2 billion this year as spending on wireless expansion has peaked and wire-line customer attrition is stabilizing. The cash will allow the company to increase its dividend if it so chooses, and/or repurchase stock for treasury. The company has a current repurchase limit of C$500 million in place.
Shares could jump 10% higher when considering all of these factors, for a total return in the high-teens.
Potential growth in wireless is huge in Canada, as only 67% of the population is a wireless customer, versus 92% in the U.S.
BCE competes with Rogers Communications (NYSE: RCI) and Telus (NYSE: TU) in Canada, and trails in average revenue per user versus its peers. This may be a positive sign, as it might be an indication of having some room to grow. BCE also expanded its footprint by purchasing 750 retail stores from the now defunct Circuit City.
Another key aspect is the rise of the Canadian dollar versus the U.S. dollar. The company has been paying its dividend in loonies and toonies, making it an even sweeter deal if the currency continues to strengthen.
The company has a nice dividend yield of 5.7%, good cash flow, and a strong foothold. The company serves land-line customers in Eastern Canada, and its affiliate, Bell Aliant, caters to Ontario and Quebec.
Wireless subscribers increased 5% in 2009 to $6.8 million.
The company has also began to dabble in high-speed internet and video services, much like Verizon.
BCE was scheduled for a buyout in 2007 for C$42.75 per share, but the deal was dropped when financing became much more challenging thanks to the credit crunch of 2008. The company picked up a great CEO in Geoge Cope when the buyout was still in the air [he was a CEO at the age of 26, and has been in the Canadian telecommunications industry for more than 20 years].
Wire-line-labor costs have dropped 9% last year and general and administrative expenses also declined 10%. With that amount of cost savings, its no wonder that their earnings grew 11% for FY09.
The company also sees FY10 EPS of about C$2.65 - C$2.75, up from the C$2.50 last year. Both Verizon and AT&T are expected to have a flat to down EPS for FY10.
The company sees free cash flow to increase to C$2 billion this year as spending on wireless expansion has peaked and wire-line customer attrition is stabilizing. The cash will allow the company to increase its dividend if it so chooses, and/or repurchase stock for treasury. The company has a current repurchase limit of C$500 million in place.
Shares could jump 10% higher when considering all of these factors, for a total return in the high-teens.
Potential growth in wireless is huge in Canada, as only 67% of the population is a wireless customer, versus 92% in the U.S.
BCE competes with Rogers Communications (NYSE: RCI) and Telus (NYSE: TU) in Canada, and trails in average revenue per user versus its peers. This may be a positive sign, as it might be an indication of having some room to grow. BCE also expanded its footprint by purchasing 750 retail stores from the now defunct Circuit City.
Another key aspect is the rise of the Canadian dollar versus the U.S. dollar. The company has been paying its dividend in loonies and toonies, making it an even sweeter deal if the currency continues to strengthen.
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