BCE (TSX:BCE) stock rose to fame in the 2000 dot.com bubble. Within 17 months (September 1999 to January 2001), the stock surged 950% with the rise of the internet. Since then, BCE has gone through its ups and downs and has achieved its status as a dividend growth stock by growing its dividend annually since 2009.
If you had invested $2,500 in BCE stock in 2003, you would have bought 79 shares. There are several ways you can make money in BCE. Your investment method determines the value of your $2,500 today.
Let us understand the various methods and see which one gives the maximum returns.
BCE: Invest and earn dividends
BCE is a dividend stock that has been paying regular dividends since 2003. Before then, in one instance (2008), the company paid half-yearly dividends instead of quarterly. If you had invested $2,500 in 2003, your 79 shares of BCE would be worth $4,771 today and paying you $305.70 in annual dividends.
The BCE stock price is less volatile, growing only 91% in 20 years, while the TSX Composite Index rose 196%. BCE’s stock price growth is limited as the price is adjusted for the dividend paid. Hence, you have to look at the total return of BCE to understand its return potential.
BCE grew its dividend at a compounded annual growth rate (CAGR) of 6.7% in the last 14 years. And it plans to continue growing them at 5% as it taps the 5G opportunity. The 5G can bring broadband-like internet to the edge, connecting everything from drones, cars, and robots to the cloud.
If you accumulated BCE’s dividends in these 20 years, you would have earned $3,826 in dividends. Your $2,500 gave a total return of $8,597 ($4,771 + $3,826). In percentage terms, BCE gave an average annual return of 6.4% in the last 20 years, hinting that the stock is a good hedge against inflation. Its total returns (including dividends) in 20 years from 2003-2023 is 244%, outperforming the TSX Composite Index.
BCE’s dividend reinvestment plan
While the buy-and-hold strategy worked well for inflation, you can compound your BCE returns with its dividend reinvestment plan (DRIP).
| Year | Dividend Per Share | Total Dividend Income | Average DRIP Share Price | Number of DRIP Shares | Total Share Count |
| 2023 | $3.87 | $806.28 | 64 | 12.60 | 220.94 |
| 2022 | $3.68 | $726.21 | 66 | 11.00 | 208.34 |
| 2021 | $3.50 | $652.62 | 60 | 10.88 | 197.34 |
| 2020 | $3.33 | $587.21 | 58 | 10.12 | 186.46 |
| 2019 | $3.17 | $530.94 | 60 | 8.85 | 176.34 |
| 2018 | $3.02 | $479.49 | 55 | 8.72 | 167.49 |
| 2017 | $2.87 | $434.19 | 58 | 7.49 | 158.77 |
| 2016 | $2.73 | $395.03 | 60 | 6.58 | 151.28 |
| 2015 | $2.60 | $359.24 | 55 | 6.53 | 144.70 |
| 2014 | $2.47 | $324.24 | 47 | 6.90 | 138.17 |
| 2013 | $2.33 | $290.48 | 44 | 6.60 | 131.27 |
| 2012 | $2.22 | $262.87 | 42 | 6.26 | 124.67 |
| 2011 | $2.05 | $229.47 | 37 | 6.20 | 118.41 |
| 2010 | $1.79 | $189.39 | 31 | 6.11 | 112.21 |
| 2009 | $1.58 | $157.48 | 24.5 | 6.43 | 106.10 |
| 2008 | $0.73 | $71.35 | 37 | 1.93 | 99.67 |
| 2007 | $1.46 | $137.22 | 36.5 | 3.76 | 97.74 |
| 2006 | $1.32 | $118.47 | 28 | 4.23 | 93.98 |
| 2005 | $1.32 | $113.32 | 29 | 3.91 | 89.75 |
| 2004 | $1.20 | $98.63 | 27 | 3.65 | 85.84 |
| 2003 | $1.20 | $94.80 | 29.7 | 3.19 | 82.19 |
I have rounded off dividend income and DRIP shares to make the table easy to read. I took the average share price to calculate DRIP shares, so there could be a slight discrepancy in the actual returns. The idea is to help you understand how DRIP compounds your returns.
If you had opted for a BCE DRIP in 2003, your $94.80 dividend from 79 shares would have brought you around 3.2 shares of BCE. In 2004, you would have received a dividend on 82.2 shares. With dividends per share growing in 17 out of 20 years and the number of shares growing every year, your total share count would surge to 208 at the start of 2023. Your $2,500 portfolio would be $12,563, and give you $804.96 in annual dividends.
Final thoughts
You can see how compounding through a DRIP drastically grew your $2,500 to ~$13,367 instead of $8,597 without a DRIP. If you don’t need dividend income today, now is a good time to invest in BCE and opt for a DRIP to compound your returns.
