BCE's (TSE:BCE) Dividend Will Be Increased To CA$0.9675

BCE Inc. (TSE:BCE) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of April to CA$0.9675. This makes the dividend yield 6.3%, which is above the industry average.

See our latest analysis for BCE

BCE Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 31.2%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 100% over the next year.

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 an annual total of CA$2.17 in 2013 to the most recent total annual payment of CA$3.87. This works out to be a compound annual growth rate (CAGR) of approximately 6.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. BCE might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that BCE's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

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's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, BCE has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is BCE not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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