Astral purchase should mean higher dividend, but no buybacks for BCE


BCE Inc.’s planned purchase of Astral Media Inc. should support a higher dividend for the telecom giant, but one analyst believes it will likely mean an end to its share buybacks.

UBS analyst Phillip Huang, who believes the deal makes strategic sense for BCE, estimates that Astral would contribute 15¢ to 18¢ in earnings per share and 12¢ to 15¢ in free cash flow per share. He also noted that the overlap between Bell Media and Astral’s head offices would create substantial synergies.

As a result, Mr. Huang anticipates the acquisition could support a 5% dividend hike by BCE is 2013.

With management planning to lower the company’s leverage to within its policy range of 1.5-2.0x by the end of 2014, Mr. Huang expects excess free cash (after dividends) through 2014 will be used primarily to pay off debt.

With BCE’s $250-million buyback program (announced on Dec. 8) now complete, and plenty of cash needed going forward for the purchase of Astral, MLSE and wireless spectrum, the analyst does not expect the company will repurchase stock through 2014.

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