BCE (TSX:BCE), a cornerstone of Canada’s telecom sector and renowned as a dividend knight, has been in the spotlight lately for its dividends. What started as a concern in 2022 became a reality in 2025. The dividend knight cut its dividend by 56% in 2025 after 16 years of growing it. The last time it slashed its dividend was in 2008. Unlike in 2009, when BCE rebounded with a dramatic dividend hike of 116% in 2009, I anticipate stagnant dividends for at least the next two years.
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Why has BCE paused dividend growth?
The world has changed for BCE. It no longer has the pricing power it once had due to its exclusive access to its own telecom infrastructure. But the regulator opened the infrastructure to competitors. Heightened competition and a subsequent price war eroded BCE’s pricing power.
Bell was not prepared for this, as it had already invested billions in building 5G infrastructure and funded it with debt. The price war reduced the return on capital employed, and high interest rates increased the cost of capital, making debt a burden. BCE still kept more than 100% dividend-payout ratio for two years in hopes of reversing the regulatory change.
The telco accepted the new reality in 2025 by exiting low-margin ventures, such as radio stations, and refocusing its assets, including converting stores into Best Buys and shifting capital to the U.S. with the acquisition of Ziply Fiber.
It slashed the dividend and began a three-year plan to reduce debt. It used some of the sales proceeds to reduce net debt to 3.8 times its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2025 and plans to reduce it to 3.7 times in 2027 and 3.0 times in 2030, underscoring its strategic shift toward financial stability.
Future of BCE’s dividends
In the next four years, BCE will sell more assets to repay debt and increase EBITDA. It is channelling efforts into high-margin sectors, including cloud computing, cybersecurity, and enterprise solutions, like Ateko, Bell Cyber, and Bell artificial intelligence (AI) Fabric. These endeavours, though initially capital-intensive, are aimed at boosting returns and debt repayment capabilities.
Bell Canada is building a $1.7 billion 300-megawatt AI data centre in Saskatchewan for sovereign AI compute. This commitment to AI has already sparked a 16% rise in BCE’s share price between December 23, 2025, and March 4, 2026, before the Iran market upheaval impacted stocks overall.
While AI’s earnings potential remains in development, BCE is strategically redefining its dividend payout range from a previous 65%-75% of free cash flow (FCF) down to 40%-55%. In 2025, the company achieved a payout ratio of 64%, which is still more than the target range but significantly lower than the 2024 ratio of 125%.
The company is trying to grow its FCF by 15% annually between 2025 and 2028. In 2025, it grew FCF by 10% and expects a similar growth in 2026. It means the last two years of 2027 and 2028 could see higher FCF growth. At that time, BCE could probably resume dividend growth.
Should you invest in this stock now?
The worst is over for BCE as it has exited all slow-growth segments. It is a good time to invest as the share price will recover from the restructuring dip and grow from its AI investments. You could expect capital appreciation in the next two years and dividend growth from 2028 onwards.
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