BCE Inc. Stock: Should You Buy Right Now?

The market pullback in telecom, utility, and energy infrastructure stocks is providing dividend investors with opportunities to buy some of Canada’s top companies at reasonable prices.

Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) to see if it deserves to be in your portfolio today.

Growth

BCE is a giant in the Canadian communications market, with wireless and wireline networks providing mobile, internet, and TV services across the country. In addition, BCE has a large media division that includes sports teams, a television network, specialty channels, radio stations, and an advertising business. To top it off, BCE also owns or has joint-venture partnerships in retail stores.

The company’s reach is so widespread that when Canadians call a friend, send a text, read an e-mail, stream a movie, listen to the news, or download music, the odds are pretty good that BCE that is involved somewhere along the way.

That’s a powerful business, and the company continues to extend its presence.

Last year, BCE made two acquisitions and launched a new business. In March, the company bought Manitoba Telecom Services in a $3.9 billion deal that bumped BCE into top spot in the Manitoba market and provided the telecom leader with a strong base in central Canada. In the fall, BCE launched Lucky Mobile, a low-cost prepaid mobile service. In January 2018, BCE completed its takeover of home security provider AlarmForce.

The new businesses should provide a boost to revenue and cash flow in 2018 and beyond.

Dividends

BCE recently raised the dividend by 5.2% for 2018. The company pays a quarterly distribution of $0.755 per share, or $3.02 per year for an annualized yield of 5.5%.

BCE has raised the payout by at least 5% per year over the past 10 years, and investors have received 14 increases since the fourth quarter of 2008. Management has maintained the targeted payout ratio of 65-75% over that time frame, with increases supported by growth in free cash flow. For example, free cash flow rose 6% on a year-over-year basis in 2017.

Looking ahead, BCE anticipates free cash flow will grow 3-7% in 2018, supported by revenue growth of 2-4%.

Risks?

Rising interest rates will eventually increase borrowing costs and could put pressure on cash flow available for distributions. That’s a big reason why the stock price has dropped from $63 in December to the current price of about $54.50 per share. Investors appear to be anticipating an exodus out of telecom and other go-to dividend sectors in favour of fixed-income alternatives. Some funds will likely move, but the pullback might be overdone.

Should you buy?

At the current price, investors can pick up a rock-solid 5.5% yield. If you’re looking for a buy-and-forget dividend stock to tuck away in your RRSP or TFSA retirement portfolio, BCE looks like an attractive pick today.

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Fool contributor Andrew Walker owns shares of BCE.