Dividend horsepower from the Big Compounding Engine (BCE)

The Big Compounding Engine (BCE) was at it again yesterday. Canada’s largest telecommunications company reported their Q2 results and announced a 5% increase in their annual common share dividend.

• BCE’s annual common share dividend will increase to $1.83/share later this year.
• Their quarterly dividend will be $0.4575/common share.
• This new dividend will be paid on October 15, 2010 to shareholders on record as of September 15, 2010.
• This means (if you’ve been counting…) BCE’s annual common share dividend has increased by 25% in the last 18 months!

BCE justified their decision to raise dividends, among other factors, given their TV revenue growth was 11.6% and their wireless revenue growth was 9.6%. Also from their website:

“Bell’s strong operating momentum and financial performance are
the direct result of the Bell team’s strong execution of our strategic
imperatives. We continue to accelerate our growth businesses in an
increasingly competitive marketplace, while continuing to invest in
the service programs and broadband networks that support our growth
into the future,” said George Cope, President and CEO of BCE and Bell

BCE’s second dividend increase this year gives me a great opportunity to showcase the horsepower compounding can provide you using BCE as my buy and hold dividend-payer.

Hypothetically, if you…

• Bought 100 shares of BCE today,
• At $32.00 per share,
• Assuming the stock price would grow at 3% (with inflation),
• Assuming the dividend would grow at 5% (much less than 2010; see above),
• The dividend yield would be 5% (about what it is now), AND
• You sat around and did nothing for 20 years….

your total value if you reinvested all the dividends would be $19,757.67

(Without reinvesting the dividends, your total value would be $11,501.29). About $8,200 less*

Impressive isn’t it?
Sure, many assumptions, 5% this, 5% that, but those numbers aren’t unrealistic. Just some quick math to illustrate why I consider BCE a Big Compounding Engine.

BCE, you made my weekend. Did it make yours thinking about passive income possibilities?

Take care!

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