Q: I believe BCE cut their dividend by 50% in 2008 during the financial crisis and restored it in 2009 the following year. In your opinion, is the company in the same financial condition as it was during the financial crisis of 2008 which may warrant a reduction in dividend? It looks like Telus also reduced their dividend during this crisis. Can you comment on why the management teams may have acted differently with their investor dividends. I would appreciate your thoughts.
5i Research Answer:
BCE suspended its dividend for TWO payments in 2008, but not really because of the financial crisis. It was in the middle of a privatization, and the buyers essentially forced the dividend to stop as condition of the deal. When the privatization collapsed, the dividend was immediately re-instated. It had reduced its dividend before as well but that was due to a spin off and income trust conversion plan. BCE was in better shape in 2008, with debt (net) about 2X cash flow, vs about 4X now. It was also growing earnings at a faster rate. On Telus, our data shows a 11.25c dividend in 2007, raised to 11.875c in November 2008 and then to 12.5c in May 2009. We see no cuts/omissions at all.