Year-to-date, the S&P/TSX 60 is up 14%, while BCE Inc. (TSX:BCE) has gained just 8.2%. That gap may not sound massive on paper, but it’s significant, especially for investors who piled into BCE for its dividend income.
The stock’s underperformance stands out because it wasn’t just another slow mover in the index. BCE became a drag, burning yield chasers in 2024 and likely again in 2025.
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Why BCE is in the dumps
BCE’s lagging performance comes down to a mix of dividend drama, debt concerns, and questionable strategic moves. The company slashed its annual dividend by more than half this year to stabilize its balance sheet. That payout had long been BCE’s main attraction, so the cut was a hard blow for income investors.
On top of that, the company’s capital allocation raised eyebrows. The sale of its Maple Leaf Sports & Entertainment stake should have been an opportunity to pay down debt, but instead, much of the cash went toward acquiring Ziply Fiber in the U.S. Northwest.
The optics weren’t great: trading a valuable, low-maintenance asset for a costly U.S. telecom expansion in a highly competitive market. It didn’t help that these moves came alongside layoffs and restructuring, further signaling that BCE is in retrenchment mode rather than growth mode.
Why the S&P/TSX 60 is the better bet
For Canadian exposure, I’d still rather own the S&P/TSX 60 Index through the iShares S&P/TSX 60 ETF (TSX:XIU) than gamble on one struggling telecom.
In a market-cap-weighted index, winners naturally take up more space over time, while underperformers like BCE fade into the background. The TSX is also far more than just telecoms – it’s heavy on financials, energy, and industrials, giving it the ability to adapt as leadership shifts between sectors.
The reality is that not every company can beat the index, and some will fall well short. The beauty of XIU is that it’s self-cleaning. The biggest and best-performing companies rise to the top, and the weakest get reduced to a rounding error. That’s a much easier way to sleep at night than betting on a single name that has to get every strategic move right.
The takeaway is simple: don’t let one company’s troubles dictate your entire investing strategy. The broad exposure, low 0.18% MER, and built-in risk management of XIU make it a far better way to bet on Canada’s stock market than pinning your hopes on a heavily indebted telecom in the middle of a turnaround.
