The Canadian equity market has continued to climb higher in 2025, driven by the resiliency shown by the broader economy and interest rate cuts. This has led to a rally across top Canadian stocks. While many stocks have witnessed solid growth, one notable exception is BCE Inc. (TSX:BCE), which has remained down roughly 27% over the past year.
This decline in BCE provides an opportunity to buy and hold this Canadian dividend stock at a discounted valuation. Let’s take a closer look.
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Why has BCE struggled?
BCE is Canada’s leading telecom and media provider, providing internet, wireless, television, enterprise services, and content distribution. Notably, challenges from inflation, regulatory hurdles, and intense price competition in wireless and broadband weighed on its financials and share price.
Moreover, the shift in its dividend policy further affected its share price. BCE, long celebrated for its consistency in raising payouts, cut its annualized dividend from $3.99 to $1.75 per share. For investors, this change was unsettling and reflected near-term challenges, raising doubts about BCE’s cash flow trajectory.
BCE’s dividend cut: A short-term setback, long-term strategy
While the dividend cut spooked investors, BCE’s move could ultimately strengthen its fundamentals. By reducing payouts, the company is preserving cash to accelerate debt reduction. Management is focusing on lowering leverage to 3.5 times adjusted EBITDA by 2027, with an eventual target of three times. In an industry where capital intensity is high and competition fierce, a leaner balance sheet could give BCE the ability to capitalize on growth opportunities.
At the same time, the company now targets a payout ratio of 40% to 55% of free cash flow. This range appears far more sustainable in the long run. Even after the cut, BCE’s dividend yield remains attractive at about 5.5%.
BCE is laying a solid foundation for long-term growth
BCE is laying the foundation for solid long-term growth. Its investments in fibre and 5G networks are beginning to translate into tangible growth. These investments enhance its network capabilities, enabling BCE to deliver faster speeds, lower latency, and improved reliability. These attributes will drive subscriber growth and retention.
In Canada, BCE’s extensive fibre footprint will help acquire new customers. Meanwhile, its U.S. operations are proving attractive with relatively low build costs and higher average revenue per user (ARPU).
Beyond connectivity, BCE is aggressively pursuing digital media opportunities, aiming to capture a larger slice of a growing Canadian ad market through expanded sports content, increased digital inventory, and its majority stake in Sphere Abacus, which enhances its content and monetization potential.
Furthermore, BCE’s focus on cost management and divestment of non-core assets will enhance its profitability, supporting future dividend payments. The communication firm’s strategic acquisitions are also likely to accelerate its growth and drive its dividend payments. Its recent acquisition of Ziply Fiber broadens its North American fibre footprint, and early performance suggests strong adoption. At the same time, the acquisition of Stratejm strengthens BCE’s cybersecurity platform, while the launch of Ateko extends its reach into high-value enterprise digital services.
Furthermore, the launch of Bell AI Fabric, designed as an infrastructure backbone for Canada’s artificial intelligence (AI) ecosystem, will further support its growth. Supported by dedicated data centres and strategic partnerships, BCE is well-positioned to capture enterprise AI demand.
The bottom line
Despite a challenging year and a significant dividend cut, BCE’s 27% decline presents a compelling opportunity for income investors. The company’s focus on debt reduction, a sustainable dividend policy, and strategic investments in fibre, 5G, digital media, and AI infrastructure positions it for durable growth. BCE’s current valuation offers an attractive entry point to buy and hold forever.
