BCE (TSE:BCE) Will Pay A Larger Dividend Than Last Year At CA$0.9675

BCE Inc.'s (TSE:BCE) periodic dividend will be increasing on the 17th of April to CA$0.9675, with investors receiving 5.2% more than last year's CA$0.92. This makes the dividend yield 6.0%, which is above the industry average.

View our latest analysis for BCE

BCE Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 124% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 29.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 101%, which probably can't continue without putting some pressure on the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CA$2.17 in 2013 to the most recent total annual payment of CA$3.68. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

BCE May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Unfortunately, BCE's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

BCE's Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for BCE (1 is concerning!) that you should be aware of before investing. Is BCE not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.