The aggressive fibre build out by Canada’s most dominant telecommunications company is happening right now. BCE (TSX:BCE)(NYSE:BCE) expects to spend around $5 billion in 2022 to connect more Canadians. The massive capital expenditure (CAPEX) budget should result to direct fibre connections for 900,000 homes and businesses.
BCE’s accumulated CAPEX since 2020 would reach $14 billion by year-end. It’s the highest ever spending by a big telco in a single year and over a three-year period. According to management, BCE continues to be there for its customers with reliable, robust networks and innovative products and services.
The commitment, backed by an unprecedented CAPEX, is likely to attract more investors, especially income investors. Besides 13 consecutive years of dividend increases, BCE is a high-yield, blue-chip stock. The $58.1 billion company pays an impressive 5.75% dividend. A $25,000 position will produce nearly $360 in passive income every quarter.
Very healthy balance sheet
In Q2 2022, BCE’s operating revenues, adjusted net earnings, and free cash flow (FCF) increased 2.9%, 5.3%, and 7.1% versus Q2 2021. Glen LeBlanc, chief financial officer for BCE and Bell Canada, said, “Bell’s Q2 financial results continued to demonstrate our disciplined focus on profitable customer growth and effective management of challenging global macroeconomic conditions.”
LeBlanc said that due to the healthy consolidated revenue, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), and FCF growth, BCE is on track to meet its financial targets for 2022. It should also support sustainable value creation for all stakeholders. All operating segments of Bell, namely wireless service (7.8%), residential internet (8%) and media (8.7%) reported standout year-over-year revenue growth.
Other business highlights include 110,761 new postpaid and prepaid mobile phone subscribers which represent a 139.5% increase from the same quarter in 2021. Retail IPTV subscribers also increased 4.7% year over year to 1.9 million. However, Bell’s retail satellite TV customer base declined 8.9% from last year due to fewer seasonal residential activations.
At the quarter’s end, available liquidity is approximately $3.1 billion, including $596 million in cash. LeBlanc added that the very healthy balance sheet, robust cash flow, and a stronger defined benefit plan would enable BCE to execute its strategic priorities and capital markets objectives for 2022.
BCE is an active participant in the Accelerated High-Speed Internet Program (AHSIP) and in previous government-initiated programs. Its president and chief executive officer Mirko Bibic, said, “Bell is proud to partner with the Government of Ontario on this historic initiative to bring our all-fibre broadband network to even more hard to reach communities across the province.”
Bibic said the approximately $5 billion CAPEX in 2022 alone is an unprecedented commitment. Bell will invest in building better communities across Canada. He said it was made possible by progressive policies at all levels of government to encourage facilities-based competition and investment.
Also, the deployment of an all-fibre network to over 80,000 homes and businesses in underserved regions across Ontario by 2025 is part of AHSIP.
BCE projects revenue growth in 2022 to be between 1% and 5%. It forecasts FCF growth from 2% to 10% compared to -11% in 2021. There’s no doubt that this telco stock deserves top billing in anyone’s dividend portfolio. The total return in 46.62 years is an incredible 75,653% (15.28% CAGR).