Valued at a market capitalization of $30.5 billion, BCE (TSX:BCE) is a telecommunications giant that has significantly underperformed the broader market in recent years.
BCE stock is down 55% from all-time highs due to fundamental business challenges. For instance, its adjusted earnings per share have narrowed from $3.50 in 2019 to $3.04 in 2024. During this period, free cash flow decreased from $3.8 billion to $2.9 billion.
In May 2025, BCE cut its quarterly dividend by 56% for the first time in 17 years, reducing the annualized payout from $3.99 to $1.75 per share.
The dividend cut was driven by multiple factors, including high debt levels following the costly $7 billion Ziply acquisition, rising interest rates that increased borrowing costs, intense competition in Canada’s telecom sector, and regulatory pressures that limited pricing power.
The dividend reduction aims to improve BCE’s financial flexibility by reducing the net debt leverage. While the dividend cut was expected, BCE aims to invest in network infrastructure and compete more effectively in the mature Canadian telecommunications market.
Is BCE stock a good buy right now?
BCE has undertaken a strategic reset to address mounting financial pressures and position itself for long-term growth. As stated earlier, the telecom giant cut its quarterly dividend by 56% to $1.75 annually, marking the first reduction since 2008, while establishing a new target payout ratio of 40–55% of free cash flow to provide greater financial flexibility.
Management expects to reduce net debt leverage from 3.8 times to 3.5 times by 2027, with a longer-term target approaching three times by 2030.
BCE’s growth strategy centers on four key priorities: enhanced customer experience, leveraging superior fibre and 5G networks, expanding technology services through the new Ateko division, and building a digital media powerhouse. The company has increased its cost savings target to $1.5 billion by 2028, already achieving $500 million in savings.
The transformative acquisition of Ziply Fiber for $7 billion, funded through the sale of MLSE assets, expands BCE’s fibre footprint into the attractive U.S. Pacific Northwest market. A strategic partnership with PSP Investments will support the construction of up to six million additional fibre passings, potentially doubling BCE’s fibre reach to eight million locations, while requiring minimal capital contribution from BCE.
Bell Media delivered a strong Q1 performance, with 36% EBITDA (earnings before interest, taxes, depreciation, and amortization) growth, driven by digital transformation and the success of its direct-to-consumer streaming initiatives.
However, wireless subscriber growth remains challenged by market saturation and competitive pressures, though management sees opportunities to improve churn rates.
While the dividend cut disappointed income-focused investors, BCE’s strategic repositioning addresses fundamental business challenges and creates a more sustainable capital structure for future growth investments and shareholder returns.
Is BCE stock undervalued right now?
Analysts tracking BCE stock forecast adjusted earnings per share to expand from $2.74 per share in 2025 to $4.47 per share in 2029. If the TSX stock is priced at 12 times forward earnings, it will trade around $50 in early 2029, indicating upside potential of over 45% from current levels.
After adjusting for dividend reinvestments, cumulative returns could be closer to 60%.
