While the TSX Composite Index has surged over 23% in the past year, BCE (TSX:BCE) has taken the opposite path, falling 32% during the same period. As a result, it currently trades at $35.90 per share with a market cap of $32.8 billion. This decline has pushed its dividend yield to an eye-catching 11.1%, making it a tempting option for income investors.
But with BCE stock trading near its lowest level in over a decade, the big question is: could it recover in the near term, and where will it be in five years? In this article, I’ll analyze BCE’s long-term fundamental growth potential and its latest earnings report to find out whether this telecom giant is still worth holding for long-term investors.
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What’s behind BCE stock’s poor performance?
BCE’s sharp decline over the last year didn’t just happen overnight. A mix of factors, including rising competition, regulatory challenges, and shifting consumer trends, played a role in its struggles. On top of that, the cost of maintaining and expanding BCE’s high-speed fibre and 5G networks has been weighing on its margins.
Then there’s the broader economic picture. Interest rates have been on a rollercoaster, and with BCE carrying a hefty debt load, higher borrowing costs haven’t exactly helped its financial flexibility.
In addition, consumers have been tightening their budgets, leading to some cautious spending on telecom services. These headwinds have put pressure on BCE stock, but the company’s latest earnings report does offer a few bright spots. Let’s take a quick look.
Steady execution in a tough market
Despite all the challenges, BCE managed to post a 5% YoY (year-over-year) increase in its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2024 to $10.6 billion, pushing its adjusted EBITDA margin to its highest level in over three decades at 43.4%. That’s an encouraging figure in today’s tough environment.
The telecom giant’s wireless service revenue held up surprisingly well. Even with intense competition, the company saw a clear shift toward its fibre internet offerings, with its total internet revenue climbing 3.3% YoY in 2024. Adding to the optimism, its media division also started to show some real momentum in the latest quarter.
Of course, not everything was positive for BCE last quarter. For example, its cash flows from operations in the fourth quarter dropped 20.9% YoY, mainly due to higher interest payments and some timing issues with working capital. But BCE has been focused on trimming costs, closing underperforming retail locations, and using automation to boost efficiency, which could help stabilize its bottom line in the coming years.
Could BCE turn things around in five years?
BCE is continuing to focus on its core strengths, including fibre Internet, 5G wireless networks, enterprise technology services expansion, and digital media ramp-up. Also, its investments in artificial intelligence-driven cybersecurity, cloud-based business solutions, and strategic media partnerships have the potential to help BCE evolve beyond just a traditional telecom provider.
Sure, there are short-term challenges, but BCE’s strong market position, steady dividend, and long-term vision make it a stock worth watching. If the company stays on track with its strategic plan, today’s low prices could end up looking like a great buying opportunity.
