BCE (TSX: BCE) has long been a favourite among dividend investors. Its high yield, currently around 8.5%, is one of the most attractive on the TSX. That said, the dividend’s sustainability has come into question. With free cash flow down and earnings hit by impairment charges, some investors wonder if the payout can continue at this level. Management reaffirmed the dividend in its latest release and even raised it by 3.1%, which suggests confidence. But that decision came alongside layoffs and deep cost-cutting, particularly in the media division. It’s a balancing act — one that will need to be carefully watched as 2025 unfolds.
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What’s wrong with BCE?
The challenge for BCE lies in navigating a market that is rapidly shifting. The traditional media landscape continues to erode. BCE’s TV and radio assets aren’t delivering the returns they once did, thanks to lower advertising revenue and changing viewer habits. Bell Media has already seen multiple rounds of restructuring, and it’s clear the company is prioritizing its core telecommunications services moving forward. Fibre internet and 5G are key to BCE stock’s future, as more Canadians rely on faster and more reliable connections for work, entertainment, and communication.
BCE stock continues to pour capital into expanding these networks. In 2024, it spent $4.9 billion in capital expenditures, which included building out fibre connections to homes and businesses, as well as expanding 5G access. While these investments put short-term pressure on cash flow, they are essential for long-term competitiveness. The telecom space is capital-intensive, and BCE stock has to keep up with rivals — ones that are also racing to lock in customers with faster and broader network coverage.
Another area worth watching is interest rates. BCE stock carries a large amount of debt — more than $36 billion as of its last report. With higher interest rates, servicing that debt becomes more expensive. In the fourth quarter (Q4) of 2024, the company reported $1.1 billion in interest payments, up sharply from the year before. That kind of cost increase eats into margins and can make it harder to support dividends, buybacks, or future growth. If rates stay high in 2025, BCE’s balance sheet could remain under pressure.
What’s coming?
Despite these headwinds, BCE stock still has strengths. It serves more than 10 million wireless subscribers, with growing postpaid accounts and relatively low churn. Its broadband internet segment also continues to add customers, driven by increased demand for higher speeds. These are reliable revenue sources, especially in a market like Canada, where competition is concentrated among a few players. BCE’s scale and infrastructure give it an advantage, particularly in more rural areas where it faces less pressure from competitors.
Analysts are divided on where BCE goes from here. Some have cut their price targets, citing risks around debt, earnings, and regulatory changes. Others still see upside, especially if inflation and interest rates continue to ease later this year. The average analyst target sits around $50, suggesting moderate upside from current levels. However, with BCE stock down more than 20% over the past year, investors are understandably cautious.
Bottom line
So, is BCE a buy, sell, or hold in 2025? The answer isn’t one-size-fits-all. For income-focused investors who prioritize yield and are comfortable with some volatility, BCE stock may still be worth holding or even buying on weakness. The dividend remains intact for now, and the core telecom business is still delivering steady results. However, for growth investors or those concerned about debt and structural changes in media, it might be better to wait for clearer signs of stability.
The stock market doesn’t like uncertainty, and BCE stock is dealing with plenty of it. That doesn’t mean it’s a bad investment. But it does mean that investors should go in with eyes wide open. The story in 2025 will come down to how well BCE manages its costs, executes its network strategy, and navigates higher interest rates. If it can do that while keeping its dividend intact, it may just be a rewarding stock to hold. If not, it’s the flashiest one on the board.
