December 10, 2010 / 12:32 PM / in 7 years

UPDATE 4-BCE ups dividend and EPS view, cuts pension deficit

* BCE increases dividend by 7.7 percent

* 2010 EPS view raised to C$2.80-C$2.85

* Pays C$750 million off future pension obligations

* Shares rise 2.5 pct to two-year high on TSX (Adds analyst’s quote, details, background)

By Aftab Ahmed and Alastair Sharp

BANGALORE/TORONTO, Dec 10 (Reuters) - BCE Inc BCE.TO, Canada’s No. 1 communications company, upped its 2011 dividend and raised its full-year earnings outlook for the second time in a year on Friday, sending its shares 2.5 percent higher.

The company also said it would pay C$750 million ($743 million) into its Bell Canada unit’s defined benefit pension plan and said its aim is for the plan to be in surplus by 2014.

“It’s a good financial decision and at the same time it reduces their liabilities,” said Desjardins analyst Maher Yaghi, who said the pension deficit had been above C$2 billion.

The voluntary payment will cut a combined C$360 million from BCE’s 2011 cash tax and pension funding expenses, boosting adjusted earnings by five Canadian cents, the company said in a statement.

BCE, which sells phone, Internet and satellite-TV services, has raised its dividend six times in the past two years, including two increases in the last year. But on Friday, it signaled that another increase later in 2011 was unlikely.

Montreal-based BCE will raise its annual dividend by 7.7 percent to C$1.97 a share in 2011, and said it had ample liquidity and cash flow generation after raising C$1 billion in five-year debt in late November. [ID:nN29228113]

“It is the company’s intention that this would be the dividend increase for 2011, and the only thing that will ever cause that to be reconsidered on the positive side would be if somehow our earnings were again outside our policy range,” the company said in a conference call with analysts.

BCE beat analyst expectations with strong wireless growth in its quarterly results in November. It expects to close a C$1.3 billion deal to buy CTV, Canada’s biggest private broadcaster, by mid-2011 as it bets consumers will increasingly watch video over the Internet and on mobile devices. [ID:nN10251109]

The annual common share dividend is payable on April 15 to shareholders of record on March 15.

The company, which dominates the wireless market in the country along with Rogers Communications RCIb.TO and Telus Corp T.TO, now sees 2010 earnings of C$2.80-C$2.85 a share, up from its previous view of C$2.75-C$2.80 a share.

It also said revenue growth was on track.

Shares in BCE were trading 2.6 percent higher at midday on Friday at C$35.97, a two-year high, on the Toronto Stock Exchange.

$1=$1.01 Canadian Editing by Unnikrishnan Nair and Peter Galloway

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