Dividends come first. here’s why.

In a Tweet heard ’round the world of small-time telcos sponging off the regulated assets of Canada’s major telecom giants, Ontario-based Teksavvy took a cheap shot at bce. “Are you Freaking Kidding Me,” said the Tweet from Teksavvy’s public relations operative. “bell accessed $122 mil from the Canadian emergency Wage Subsidy during pandemic while raising quarterly dividend.”

Attached to the Teksavvy Twitter post was a link to Teksavvy’s blog and comments by Teksavvy’s “vice-president of insight and engagement,” former journalist Peter Nowak, who reported on issues raised by Toronto Liberal MP Nate erskine-smith when he interrogated a senior bce executive during a House of Commons committee meeting in Ottawa in late January.

erskine-smith, in classic blowhard small-time political grandstanding mode, questioned robert Malcolmson, bce’s legal chief regulatory officer, about why bce accepted $122 million in federal COVID job-saving money while sitting on $5.2 billion in liquidity, internet revenue growth of 10 per cent and having declared a five per cent quarterly dividend hike. “So,” said erskine-smith, “instead of accessing that available liquidity or perhaps not increasing that dividend, you thought it best to access public funds?”

While Main Street businesses “are getting crushed in the pandemic,” said erskine-smith, bce could have dipped into its cash pool instead of taking government money.

Thus did erskine-smith jump aboard the months-long media-boosted campaign (Toronto Star, CBC, National Post) backed by leftish academics to portray the dividend-paying corporations that accepted government Covid-related job protection funds as a great moral, political and economic scandal.

Here’s the argument reduced to its core elements: Federal lockdowns create job losses. Profitable corporations that pay dividends should not be allowed to draw federal funds to protect the lost jobs. Instead, the continued payment of workers who are without work is the responsibility of the profitable corporations.

For example, when bce was under lockdown orders to close The Source, its retail electronic chain, the anti-dividend moral code dictates it had no right to claim government support for those workers. If bce (and other public companies) accept support to save jobs, they should cut dividends.

It’s an idea that flies high in liberal academia and some think-tanks where corporate respect for shareholders and the role they play in keeping the market economy spinning is routinely downplayed, even ridiculed. under the new rules of corporate morality, as devised by the proponents of the new ESG governance model, executives must first align with environmental, social and governance codes of conduct.

under the new ESG model, dividends and shareholders are in the back seat. The best that can be said of dividends in some ESG and media circles is that they help maintain and raise stock prices — which is seen as just more pandering to shareholders at the expense of employees and other higher ESG priorities.

Out in the real market world, however, even ESG investors track and pursue dividends. For example, New york-based Clearbridge Investments maintains a dividend Strategy ESG portfolio that “targets a high level of current income, growth of income and capital preservation in challenging markets by owning large cap companies with positive ESG attributes that pay a dividend and have the potential to significantly grow their dividend.”

bce fits that ESG investment profile to a T, as do scores of other Canadian companies that have been tarred in the media with the pandemic-dividend brush.

It is also simplistic to dismiss dividends as little more than props for share values. Millions of individuals and institutions depend on dividend flow to support savings and investments, including pension plans. dividend flows and share values are also positive signals to new investors — including bond buyers and bank lenders — who supply the new money corporations need to expand corporate activities, create jobs and grow the economy.

That was the message delivered by bce’s Malcolmson during his grilling by the Toronto Liberal MP, and by bce executives last week in their reports on the company’s latest results. bce has increased dividends by five per cent in each of the past 13 years. bce’s stock price has risen from $20 to $55 (although still well below $64 pre-pandemic levels). The anti-dividenders would have bce cut the dividend and risk lowering the market value of its shares by implying a weaker corporate financial outlook.

bce’s chief executive, Mirko bibic, said the company plans “to invest an extra $1 billion to $1.2 billion over the next two years, of which approximately $700 million will be spent in 2021 to accelerate fibre, wireless home internet and 5G, and it plans to invest billions more expanding its technical and market capacity.” being able to maintain the dividend and the company’s market value has allowed bce to raise $24 billion in debt for investment over the past dozen years.

The Canadian Taxpayers Federation has argued that the government should redesign pandemic-style jobs payments to more directly target employees and somehow avoid sending cash to companies that pay dividends and are still profitable. but the basic problem remains, which is designing a relief program for employees that somehow is not perceived as a benefit to corporations.

In today’s anti-shareholder ideological environment, that’s a big challenge.

MAINTAINING PAYOUTS PROTECTS AND CREATES JOBS, GROWTH.