I am a long term holder of BCE however, it does have issues that aren't getting better very fast. Moodys has BCE at one step above Junk bonds and others have them on credit watch with a negative outlook, so basically pending a downgrade. BCE has a lot of work to do to turn this around and they aren't moving very fast to get it done. You can't keep paying out 140% of FCF and adding debt to do it forever. It will ocme home to roost.
(Bloomberg) -- BCE Inc. was cut to the brink of junk by Moody’s Ratings on concerns about the telecom company’s earnings growth failing to keep pace with its debt load.
The Canadian communications company’s issuer rating was downgraded to Baa3 from Baa2 and its outlook changed to stable from negative on Friday. Moody’s also lowered subsidiary Bell Canada’s issuer and unsecured note rating to Baa2 from Baa1, levels that indicate moderate credit risk. Moody’s pointed to a growing debt-to-earnings before interest, tax, depreciation and amortization ratio.
“Bell Canada has consistently moved debt/Ebitda up annually since 2019 and has not demonstrated any commitment to deleveraging while maintaining a dividend growth model,” the report read. This “raises governance risk and is a factor that drives the rating downgrade.”
Sell-side analysts have questioned BCE’s strategy of continually growing its dividend even as its growth has slumped.
BCE has a total debt load as of June of about C$39.5 billion ($29.3 billion) with roughly C$6.6 billion in debt coming due over the next year, data compiled by Bloomberg show. Its net debt-to-Ebitda ratio grew from 2.6 in 2019 to about 3.9 as of the end of the second quarter.
--With assistance from Dan Wilchins.
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