In Day 1 of BCE Inc.’s (BCE) life after its failed privatization, the company revealed its capital plan that includes the reinstatement of its C$0.36.5 quarterly dividend. Shareholders of record as of Dec. 23 will get the payout, which continues to equate to C$1.46 annually.
With BCE shares declining nearly a dollar in Toronto trading on Friday to just above C$21 per share, its dividend yield is almost 7%.
The Montreal-based telecom giant also said it will repurchase up to 5% of its outstanding common shares, or about 40 million in total, at a cost of about C$880-million at Thursday’s closing price. The share buyback plan is accretive to 2009 earnings per share by C$0.05 to C$0.10 depending on how quickly it is implemented, according to Credit Suisse analyst Randal Rudniski.
“We believe that BCE’s shareholder value initiatives should be viewed as a process rather than a one-time event,” he told clients, noting that the company suggested it will provide more details at its annual general meeting on Feb. 17, 2009.
Mr. Rudniski expects these initiatives will be rolled out in the next year or two. "With an excess cash position of C$2.7-billion, BCE is well-positioned to deliver on this over time,” he said, adding that the troubled state of capital markets makes maintaining a strong liquidity position a good idea.
Future moves could include payment of the dividends withheld in the second half of 2008, an additional C$1-billion share buyback program, an increase in the dividend rates and a possible buy-in of Bell Aliant Regional Communications Income Fund, the analyst suggested.
He rates BCE “neutral” with a C$28 price target, calling C$22 an “interesting entry point” given that it puts the stock towards the low end of its peer group in terms of both price-to-earnings and EV/EBITDA valuation.