It’s no secret that I’m not precisely bullish on BCE Inc. (TSX:BCE). A part of that skepticism comes from private expertise. I was a buyer, and the mixture of gradual web speeds and dangerous customer support from abroad name centres left a poor impression.
So when the corporate was pressured to slash its dividend in 2025, I couldn’t say I used to be fully stunned. Earlier than the lower, BCE’s dividend had turn out to be unsustainable. In 2024, the payout consumed roughly 125% of free money circulation.
The reset has at the very least made the scenario extra secure. After the dividend was decreased, BCE’s payout ratio dropped to round 64% of free money circulation in 2025. That’s much more cheap and provides the corporate some respiration room.
Administration has additionally been making strategic strikes. The acquisition of U.S.-based Ziply Fiber helped enhance income and increase BCE’s footprint in fibre web. The corporate has additionally been leaning closely into synthetic intelligence (AI) initiatives.
Even so, stepping again and looking out on the larger image, I nonetheless battle to see BCE as a long-term outperformer. The present dividend yield of about 4.9% is sustainable at this time, however the identical structural pressures that brought about the sooner dividend drawback might ultimately reappear.
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The long-term bear case for BCE
One of many largest headwinds for BCE might come from an sudden supply: immigration coverage.
Canada has lately tightened its immigration targets, notably in terms of non permanent residents. Between January and November 2025, arrivals of non permanent residents dropped by roughly 52%, together with worldwide college students and international staff.
This aligns with the federal authorities’s aim of lowering the share of non-permanent residents to beneath 5% of the inhabitants by 2027.
For telecom firms, inhabitants development is among the most dependable drivers of income enlargement. Telecom suppliers like BCE develop primarily by including new connections.
Most households don’t buy a number of cell plans past what they want. Increasing the subscriber base sometimes requires inhabitants development. Immigration, notably worldwide college students and non permanent staff, has been a significant supply in recent times.
If that development slows, BCE has restricted choices. The corporate might try to boost costs, however in Canada’s telecom oligopoly, that dangers driving prospects towards opponents. Increased churn would undermine the technique.
Another choice could be acquisitions, however BCE’s stability sheet already limits its flexibility. As of the latest quarter, the corporate held solely $320 million in money in opposition to about $41.1 billion in debt.
Whereas BCE generates strong working money circulation of round $7 billion over the trailing 12 months, levered free money circulation drops to roughly $3.3 billion as soon as debt servicing is accounted for. That doesn’t depart limitless room for enlargement.
The place BCE stands at this time
None of this implies BCE is a foul funding proper now. The dividend reset has stabilized the payout, and the present yield close to 4.9% seems sustainable underneath present situations. Administration has additionally indicated that they intend to renew dividend development.
There are additionally some constructive developments inside the enterprise. AI-driven options income has been rising rapidly, with Bell Cyber and Ateko reporting roughly 31% development in current quarters. Fibre web adoption can be bettering, with greater than 49,000 new fibre activations reported lately, serving to assist sturdy web income development.
Nonetheless, the broader structural challenges stay. The identical administration staff stays in place, and there’ll probably be strain from shareholders to renew dividend will increase sooner fairly than later. Personally, I would favor the corporate preserve the payout flat and strengthen the stability sheet with extra layoffs.
That mentioned, firms hardly ever select that route when earnings buyers are watching intently. For these causes, I see BCE at this time as secure however not notably compelling. The dividend is safer than it was earlier than, however the long-term development outlook stays unsure. Over the following 5 years, I think the inventory will battle to meaningfully outperform the broader market.