RE:RE:RE:Nope - Not a Dividend Cutincomedreamer11 wrote: From TD ( expecting dividend increase)
Event
We have tweaked our estimates and target price (see today's telco preview note for more details: LINK). With lower bond-yield forecasts, our BCE target price has increased, which, combined with recent weakness, has pushed us back to BUY.
Impact: POSITIVE
We believe Q4/23 results expected in February will show that BCE is doing a good job managing opex and capex, while striking a healthy balance between volume and ARPU growth in wireless. We are not pleased with industry pricing discipline in wireline/Internet (we have lowered our estimates and target multiples today for wireline/cable segments at Rogers, BCE, and TELUS), but:
1. We hope to see wireline price increases implemented and sustained by both Rogers and Bell in early 2024, so that ARPU and revenue growth trends can improve by H2/24.
2. Wireless growth remains strong enough (mostly volume-driven) to drive respectable consolidated EBITDA growth in Q4/23E and FY2024E, despite headwinds in wireline.
3. Regardless of the pace of EBITDA growth, we believe declining bond yields should drive a near-term recovery in BCE shares. With the stock down more than peers (except CCA) in the final four months of 2023 (Exhibit 1), the dividend yield is now up to 7.2%, which is excessive relative to GoC 10-year yields (dividend versus bond spread is shown in Exhibit 2).
TD Investment Conclusion
We are upgrading BCE to BUY from Hold. We expect a dividend increase with Q4/23 results on February 8. Some investors fear that growth could decelerate to 3% from 5%, but even at 3%, the prospective yield would be 7.4% at the current share price (7.6% if they bump 5%). Simply too high for the fibre, spectrum, and other long-life infrastructure assets within BCE, and notably higher than both AT&T and Verizon. On our FCF definition, the payout ratio will be over 100% in 2024 with either a 3% or 5% dividend increase, but the amount of borrowing required to fund the delta is trivial, in our view. We estimate $242mm in debt to fund 5% dividend growth and $171mm to fund 3%, which are both rounding error on total debt/prefs of ~$38 billion.
Aaah! nostro caro amico, Valentino Vincenzo. We discussed him here last summer when he was accusing MaBell of hiding vital info under small print. Was even insinuating a possible dividend cut.
Notice how smoothly he has made the transition to the buy side without ever admitting or apologizing
to us.
Ciao