It is no secret that I am not exactly bullish on BCE Inc. (TSX: BCE). Part of that skepticism comes from personal experience. I used to be a customer, and the combination of slow internet speeds and bad customer service from overseas call centres left a poor impression.
So when the company was forced to slash its dividend in 2025, I could not say I was entirely surprised. Before the cut, BCE’s dividend had become unsustainable. In 2024, the payout consumed roughly 125% of free cash flow.
The reset has at least made the situation more stable. After the dividend was reduced, BCE’s payout ratio dropped to around 64% of free cash flow in 2025. That is far more reasonable and gives the company some breathing room.
Management has also been making strategic moves. The acquisition of U.S.-based Ziply Fiber helped boost revenue and expand BCE’s footprint in fibre internet. The company has also been leaning heavily into artificial intelligence (AI) initiatives.
Even so, stepping back and looking at the bigger picture, I still struggle to see BCE as a long-term outperformer. The current dividend yield of about 4.9% is sustainable today, but the same structural pressures that caused the earlier dividend problem may eventually reappear.
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The long-term bear case for BCE
One of the biggest headwinds for BCE may come from an unexpected source: immigration policy.
Canada has recently tightened its immigration targets, particularly when it comes to temporary residents. Between January and November 2025, arrivals of temporary residents dropped by roughly 52%, including international students and foreign workers.
This aligns with the federal government’s goal of reducing the share of non-permanent residents to below 5% of the population by 2027.
For telecom companies, population growth is one of the most reliable drivers of revenue expansion. Telecom providers like BCE grow primarily by adding new connections.
Most households do not purchase multiple mobile plans beyond what they need. Expanding the subscriber base typically requires population growth. Immigration, particularly international students and temporary workers, has been a major source in recent years.
If that growth slows, BCE has limited options. The company could attempt to raise prices, but in Canada’s telecom oligopoly, that risks driving customers toward competitors. Higher churn would undermine the strategy.
Another option would be acquisitions, but BCE’s balance sheet already limits its flexibility. As of the most recent quarter, the company held only $320 million in cash against about $41.1 billion in debt.
While BCE generates solid operating cash flow of around $7 billion over the trailing 12 months, levered free cash flow drops to approximately $3.3 billion once debt servicing is accounted for. That does not leave unlimited room for expansion.
Where BCE stands today
None of this means BCE is a bad investment right now. The dividend reset has stabilized the payout, and the current yield near 4.9% appears sustainable under current conditions. Management has also indicated that they intend to resume dividend growth.
There are also some positive developments within the business. AI-driven solutions revenue has been growing quickly, with Bell Cyber and Ateko reporting roughly 31% growth in recent quarters. Fibre internet adoption is also improving, with more than 49,000 new fibre activations reported recently, helping support strong internet revenue growth.
Still, the broader structural challenges remain. The same management team remains in place, and there will likely be pressure from shareholders to resume dividend increases sooner rather than later. Personally, I would prefer the company keep the payout flat and strengthen the balance sheet with more layoffs.
That said, companies rarely choose that route when income investors are watching closely. For those reasons, I see BCE today as stable but not particularly compelling. The dividend is safer than it was before, but the long-term growth outlook remains uncertain. Over the next five years, I suspect the stock will struggle to meaningfully outperform the broader market.
