When Dividend Paying Stocks Restructure

BCE, Canada’s largest communications company, is going through some restructuring. For full details you can check out this article. As I always do, I have been doing some research into this as I hold BCE in my portfolio. I bought it awhile ago – mainly for the high dividend yield. They had one dividend increase a year or so ago but they have not been in the habit of raising it. They are NOT on Mergent’s Canadian list of dividend achievers.

Basically, I am going to receive some units of a Trust that is created as a result of combing Ontario’s, Quebec’s, and Aliant Inc.’s wireline business. My feelings on BCE is summed up in this statement from Mark Evans’ blog:

The question is whether it’s just more financial re-engineering by BCE Inc. and/or a shuffling of the deck chairs on the Titanic. The transaction, which will create a business with 3.4 million phones lines, still doesn’t change the fact Bell Canada is losing hundreds of thousands of local phone customers a year as the cablecos move into the market

I have known for some time now that BCE is not the greatest stock. It is massive (by Canadian standards) and has difficulty creating new value. The stock price has not moved much since I bought it and I have been simply throwing the dividends back into the stock. My return since I bought it is about 4% – pretty much the dividend yield.

What am I going to do – wait some more. I want to see how the transaction plays out. I will receive a new income trust out of it and the expected yield is in the 7 to 8% range. Of course I will need to look closely at the fundamentals. Let me know if any of you hold BCE and what you are going to do.