Canadian Capitalist

Last week, I bought Bell Canada Enterprises (TSX, NYSE: BCE) for my spouse’s retirement account. BCE and its subsidiaries offer a wide range of services including telecom (fixed line, long distance and wireless), data (dial-up and high-speed internet access) and video (Bell ExpressVu satellite TV). BCE also has significant stakes in Bell Globemedia (CTV and The Globe and Mail media properties), Aliant Inc. (TSX: AIT), Telesat and CGI Group Inc. (TSX: GIB.SV.A).

BCE is expected to earn $2.16 in 2005 and $2.28 in 2006. At its recent price of $28.50, it has a P/E ratio of 13. The stock also pays a dividend an annual dividend of $1.32, which yields about 4.6%. At the end of 2004, BCE had 12.9 million local phone service, 5.3 million wireless, 1.8 million DSL and 1.5 million video customers. Wireless, high-speed internet and video are showing growth, but local telephone declined about 1.1% in 2004 and 0.8% in 2003.

My rationale for investment is that earnings growth could come from BCE’s growing service offerings and cost reductions. Risks include competitive pressures in the local telephone business and unfavourable CRTC rulings like this recent one.

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