BCE Inc.: The Foundation for Your Income Portfolio

BCE Inc. (TSX:BCE)(NYSE:BCE) has an integrated business that kicks off large amounts of cash flow, so it can consistently pay a lucrative dividend.

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

For investors that are looking for a long-term buy-and-hold stock for their income portfolios, there are few stocks that can provide as powerful a foundation as BCE Inc. (TSX:BCE)(NYSE:BCE).

But why is BCE such a great income stock? A few reasons stand out.

Multiple touch points

The business has multiple touch points with its customer’s lives through its core offerings of internet, wireline, wireless, and TV subscription services. But it doesn’t stop there.

It also has a massive portfolio of media assets, including a vast network of television stations, radio, websites, etc. It even has equity in the Montreal Canadiens, and it owns 37.5% of Maple Leaf Sports & Entertainment Ltd., which owns the Toronto Maple Leafs, Toronto Raptors, and Toronto FC.

This means that an individual might watch a Toronto Raptors game using the television subscription provided by Bell and be on the internet reading about the latest sports rumours. Each of those points generates revenue for BCE.

Company growth

In its Q1 2017 earnings report, the company reported adjusted earnings per share of $0.87 versus $0.85 in Q1 2016. Its revenue grew by 2.2% thanks to the 7.1% increase in its wireless division and the 1.3% increase in Bell Media.

There were a few key numbers to look at in the report. First, churn increased in the quarter. Churn is the percentage of customers that leave. The lower this is, the better for the company. BCE blames aggressive marketing from some of its competitors. I’m actually okay with this because it means that BCE is not chasing every last dollar, which devalues its offerings.

The other number worth looking at is the average revenue per user. This increased by 4.2% to $65.66. That’s a sizeable increase and is a big reason earnings were also up.

On the growth end, I expect more thanks to the company’s acquisition of Manitoba Telecom Services (MTS). We should get a better idea of the impact of this acquisition over the next few quarters, but it is estimated that it will result in $100 million in combined pre-tax annualized opex and capex synergies. Further, MTS adds 229,000 internet subscribers, 109,000 IPTV subscribers, 477,000 wireless subscribers, and 420,000 network access services.

Dividend

The third reason BCE is such a great income stock is because of the dividend. It currently yields 4.83%, which is good for $0.72 per quarter. Earning $2.88 a year in dividends is really lucrative, and it can be the foundation for any income portfolio.

For example, let’s assume you’ve invested $10,000 in BCE. After the first year, you’d earn $484.60 in dividends. By rolling that back into the company (or into other stocks), you can see how your income portfolio can begin growing.

Going forward, I expect management to increase the dividend, which will make your yield on cost even better.

What to expect

Ultimately, BCE is not going to be a fast-moving company. This is about income. The good news is, because the company doesn’t see rapid changes in price, you can scale in to your position as new cash becomes available without worrying about paying too much for your shares. For those that need a strong, secure foundation stock for their income portfolio, BCE is the way to go.

Should you invest $1,000 in BCE right now?

Before you buy stock in BCE, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and BCE wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jacob Donnelly has no position in any stocks mentioned.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Dividend Stocks

senior man smiles next to a light-filled window
Dividend Stocks

The Top Canadian Stocks to Buy Right Now With $2,000

These two Canadian stocks offer it all – growing industries that remain essential, plus high dividends. So what are you…

Read more »

money cash dividends
Dividend Stocks

This 5 Percent Dividend Stock Pays Cash Every Single Month

There are plenty of great dividend stocks on the market, but this dividend stock can provide a monthly income and…

Read more »

Trans Alaska Pipeline with Autumn Colors
Dividend Stocks

Should You Buy Enbridge While it’s Below $60?

Enbridge is down 8% in recent weeks. Is ENB stock now oversold?

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

2 Recession-Ready Dividend Stars That Could Shield Your Portfolio

Hydro One (TSX:H) and another low-beta defensive dividend player could help your portfolio through tough times.

Read more »

woman analyze data
Dividend Stocks

The Absolute Best Canadian Stocks to Buy and Hold Forever in a TFSA

You can buy these low-risk Canadian stocks now and hold them in your TFSA forever to see your hard-earned savings…

Read more »

rail train
Dividend Stocks

Is CNR Stock a Buy While it’s Below $150?

Down 18% from all-time highs, CNR stock is fairly valued and trades at a discount to consensus price targets right…

Read more »

The sun sets behind a power source
Dividend Stocks

Outlook for Fortis Stock in 2025

Fortis is up 15% in the past year. Are more gains on the way?

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution 

The investment environment is seeing a shift in 2025. Here is an investment strategy to consider for your $7,000 TFSA…

Read more »