The Canadian telecom scene has been a pretty hard place to invest in over the past three years. Undoubtedly, there have been far more bullish places to put one’s hard-earned investment dollars, especially amid the latest ascent in the TSX Index.
Whether we’re talking about strength in the big financials (the Big Six banks have continued to rise), the parabolic gains to be had in the gold miners, robustness in energy, or just broad strength across the board (think the consumer discretionary and staples stocks that have been standing tall), there’s a lot of earnings momentum underneath the hood of the Canadian stock market. And if corporate earnings can keep stacking up well against expectations, there’s no reason last year’s winners can’t have another strong year.
So, why settle for industries that are lagging when there are so many that are firing on all cylinders, with tailwinds that might not fade away so quickly? I do think that the selling in the Big Three telecoms has been excessive, to say the least. While it’s always hard to time a bottom or go bottom-fishing – or worse, falling-knife catching – investors who do seek steeper discounts might find something compelling in the battered names like BCE (TSX:BCE), especially as the technicals look far less horrid.
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The case for buying BCE on weakness
In many ways, BCE stock seems to be in a bit of a peculiar spot. On the one hand, many income investors may have moved on after the dividend reduction it served up. Of course, switching from BCE to a rival isn’t all too hard to do, especially for those who want a fatter dividend yield. Of course, the BCE dividend reduction might have tarnished the stock’s status as a dividend darling, but I do think there’s still ample value in the shares right here, especially as BCE looks to start a new dividend growth streak.
At the same time, BCE’s dividend reduction has granted it far more financial flexibility. Combined with strategic cuts across the organization, the company might have what it takes to get back onto the growth track a bit faster. Personally, I think reducing the dividend will prove to be the right call as the telecom looks to get a front-row seat to an industry recovery, one that some pundits think could be in the cards this year.
Are there intense headwinds and other worries facing BCE this new year?
Most definitely. But the company can certainly find cost savings as the name of the game shifts to increasing operating efficiencies and driving margins, rather than trying to get growth back on the high track. Personally, I think most of the damage has already been done to BCE shares. Even if you’re not confident in management’s ability to score better margins via cuts and optimization moves, shares do look close to the cheapest they’ve been in recent memory.
At 5.1 times trailing price-to-earnings (P/E) and 1.7 times price-to-book (P/B), BCE is undeniably a deep-value stock, one that might be underpriced if either the industry or company-specific moves provide enough relief to power a few quarterly earnings beats. In early 2026, expectations seem so low that BCE stock might be able to walk away as a winner without doing anything spectacular.
While BCE has pressures ahead of it, I like its chances of coming out on top. Either way, I think BCE stock will be markedly higher in five years’ time as margin efforts look to pay off and the dividend looks to grow at a decent pace.
