Stock Analysis & Ideas

BCE Stock: Low Volatility with an Attractive Dividend Yield

Story Highlights

Although analysts have a neutral outlook on the company, BCE is an efficient operator with an attractive dividend yield. As a result, BCE is likely a good choice for investors who want to receive income without the volatility of the overall market.

BCE (TSE: BCE) (BCE), formerly Bell Canada Enterprises Inc., is Canada’s largest communications company. The company provides advanced broadband communication networks, wireless, wireline, and Internet services to residential, business, and wholesale customers in the country.

It also offers television (TV) services, including conventional TV, specialty TV, pay-TV, and streaming services, as well as digital media, radio broadcasting, and out-of-home advertising services.

BCE is a defensive stock that has held up pretty well in the first half of a volatile market. Indeed, the stock is only down roughly 1% year-to-date when including dividends. In addition, the company operates efficiently while also providing investors with an attractive dividend yield.

Measuring BCE’s Efficiency

BCE needs to hold onto a lot of inventory in order to keep its business running. Therefore, the speed at which BCE can move inventory and convert it into cash is very important in predicting its success. To measure its efficiency, I will use the cash conversion cycle, which shows how many days it takes to convert inventory into cash. It is calculated as follows:

CCC = Days Inventory Outstanding + Days Sales Outstanding – Days Payables Outstanding

BCE’s cash conversion cycle is -26, meaning the company converts inventory into cash before having to pay suppliers. Basically, BCE doesn’t have to put up any money to finance inventory purchases because it can move its inventory and collect the payments while still on credit. Thus, BCE’s suppliers are essentially financing its operations.

In addition to the cash conversion cycle, let’s also take a look at BCE’s gross margin trend. Ideally, I would like to see a company’s margin expand each year. This is, of course, unless its gross margin is already very high, in which case it is acceptable for it to remain flat.

In BCE’s case, its gross margin has improved in the past several years, going from 41.8% in Fiscal 2018 to 43.5% in the past 12 months. This is ideal because it allows the company the opportunity to increase free cash flow or reinvest a larger percentage of revenue into growth initiatives.


For income-oriented investors, BCE pays a 5.8% dividend yield on an annualized basis. When taking a look at BCE’s historical dividend yield, you can see that it has remained relatively flat:

At 5.8%, the current yield is on the low end of the range, indicating that income-oriented investors are paying a premium relative to yields they have been able to receive in the past.

Analyst Recommendations

BCE has a Hold consensus rating based on two Buys and eight Holds assigned in the past three months. The average BCE price target of C$68.60 implies 8.4% upside potential.

Final Thoughts

Although analysts have a neutral outlook on the company, it is an efficient operator with an attractive yield. As a result, BCE is likely a good choice for investors who want to receive income without the volatility of the overall market.


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