Thursday, December 8, 2011

Bell Announces Share Buyback and Dividend Increase. The Company is Flush With Cash and Contributes Extra Money to DB Pension Plan.

Great news for Bell Canada (TSE: BCE) investors as the company announced an increase in its dividend by 5%, and a $250 million share buyback program.

The buyback program will be paid for with existing cash reserves. In addition, the company will make a voluntary $750 million contribution to the company's defined benefit plan for its employees. This will ease the burden of its defined benefit pension plan in future years. To be sure, over the last 5 years, the company has been gradually relieving itself of its Defined Benefit plans with the introduction of more Defined Contribution pension plans for its employees.

The defined contribution pension plans require that employees select from a number of investment choices and, though BCE contributes money to the plan, take responsibility for their own retirement savings. With populations living longer, and many workforces shrinking, defined contribution plans help employers save money by relieving them of the responsibility of caring for their employees into their old age.

With its dividend still above 5%, and the company flush with cash, BCE remains a good investment for many individuals in today's marketplace.

Full Disclosure: Matthew J. W. Clarke owns or indirectly controls shares in BCE.

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