BCE Inc. (TSX:BCE) adjusted its dividend last year in a move that was both necessary and messy. Investors were rocked as BCE’s stock price fell significantly, and this telecom stock’s fall from grace was cemented. Today, BCE’s dividend is lower but sustainable. The company has the ability to fund new growth, and BCE’s stock price is cheap.
This means opportunity for new and old investors alike. Trading at a mere 12 times this year’s expected earnings and yielding 5.7%, BCE stock is looking attractive. Here’s what you need to know about BCE’s dividend.
What happened?
Back in 2025, BCE slashed its annual dividend by more than 50% to the current $1.75. The dividend had become unsustainable given the operating pressures that BCE had been facing.
This included the new regulatory environment, which opened up the industry to competition, triggering aggressive competitive pricing wars. It also included changing immigration trends. An immigration slowdown took a chunk of business away from BCE, as new customers were now harder to come by.
As a result, BCE’s capital investment will be redirected away from the company’s legacy business until the environment improves. BCE will invest in new, higher-growth areas instead.
Dividend coverage improves
BCE’s 2026 outlook is calling for 1% to 5% revenue growth and 4% to 10% free cash flow growth to $3.3 to $3.5 billion. The dividend payout target is 40% to 55% of free cash flow. In the first quarter, BCE’s dividend represented 55% of free cash flow – at the upper end of the payout target, but in line with the company’s payout range.
So, the days of BCE paying out more than its free cash flow in dividends are over. And the days of BCE borrowing to fund its dividend are also over. The company can now get its balance sheet in order.
BCE currently enjoys a strong liquidity position of $4.3 billion. The company’s net debt leverage ratio, which is calculated by dividing its net debt by its earnings before interest, taxes, depreciation, and amortization (EBITDA) is 3.8 times. BCE is targeting a net debt leverage ratio of 3.5 times by the end of 2027 and even lower in 2028.
Growth initiatives
As BCE continues to work on shoring up its balance sheet and dividend metrics, the company will continue to redirect its capital investment away from its struggling legacy business.
For example, BCE acquired Ziply, the largest broadband and fibre internet provider in the US Pacific Northwest. The US fibre market is underpenetrated. The US-based internet provider will give BCE more scale, while diversifying its operating footprint and establishing a platform for further expansion.
Also, BCE is investing in its Bell Business Markets (BBM) division. BBM offers leading artificial intelligence (AI), cloud, security, IoT, collaboration, and contact centre solutions, as well as managed and professional services. This is all backed by BCE’s broadband and wireless networks. In the last quarter, Bell Business Markets revenue increased 9.7%, driven by a 113% growth in AI-powered solutions. Management’s revenue objective for this business has increased from $1.5 billion to $2 billion by 2028. The momentum is going strong.
The bottom line
BCE’s dividend is at a sustainable level today, as it allows for debt reduction and continued capital investment to fund future growth. It was a difficult road and investors are understandably skeptical, but BCE stock is looking increasingly attractive.
