Canada's BCE Boosts Dividend

Dec.29.09 | About: BCE Inc. (BCE)

Canada’s largest telecom carrier, BCE Inc (NYSE:BCE), has increased its annual dividend by 7% year-over-year to C$1.74 (US$1.63) per share, equating to approximately 6.4% yield. The revised dividend will be effective from the first-quarter 2010 dividend, payable on Apr. 15, 2010 to shareholders of record as of Mar. 15, 2010.

This represents the third increase in the company’s annual dividend payout in the last 12 months. Since the fourth-quarter 2008, BCE has increased its annual dividend by 19%. The company is committed to a dividend policy with a target dividend payout of 65−75% of adjusted earnings per share.

BCE has also announced a fresh share repurchase authorization as it plans to use a sizable portion of surplus cash in 2009 to return up to C$500 million (US$468 million) to its shareholders in 2010 under the Normal Course Issuer Bid (NCIB) share buyback program. Moreover, BCE will also make a C$500 million special voluntary pension contribution.

The company has completed its previous C$1 billion (US$936 million) authorized share buyback program with the repurchase of 36 million shares in aggregate during the first nine months of 2009, returning nearly C$894 million (US$837 million) to the shareholders.

BCE remains committed to offering incremental returns to its shareholders by leveraging its healthy free cash flow. The company reported free cash flow of C$1.4 billion (US$1.3 billion) in the first nine months of 2009, reflecting 38% year-over-year increase. BCE distributed C$891 million as dividends to its shareholders for the period, representing roughly 62% of free cash flow.

The company’s continued efforts to maximize shareholder returns are encouraging, especially considering the current volatile macroeconomic backdrop and heightened competition in the Canadian wireless market.

BCE’s wireless subsidiary, Bell Canada, is currently battling with two other national carriers, Telus (NYSE:TU) and Rogers Communications (NYSE:RCI) to win subscribers. The competitive scenario is set to intensify with the entry of new wireless players in the near future as a result of Industry Canada’s C$4.25 billion (US$4 billion) spectrum auction. A new market entrant, Wind Mobile, has reportedly launched its mobile services, and more operators such as Globalive are expected to follow.