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BCE's (TSE:BCE) Shareholders Will Receive A Bigger Dividend Than Last Year

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BCE Inc.'s (TSE:BCE) dividend will be increasing to CA$0.92 on 15th of July. The announced payment will take the dividend yield to 5.2%, which is in line with the average for the industry.

See our latest analysis for BCE

BCE Doesn't Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, the company was paying out 109% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 4.8% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 111%, which is a bit high and could start applying pressure to the balance sheet.

historic-dividend
historic-dividend

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from CA$2.07 in 2012 to the most recent annual payment of CA$3.68. This implies that the company grew its distributions at a yearly rate of about 5.9% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

BCE May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, BCE's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

We're Not Big Fans Of BCE's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for BCE (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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