Don’t Buy BCE Stock Until This Happens

BCE (TSX:BCE) stock fell more than 8% in the first half of April to $33. Why this dip, and should you buy this dip? The answer lies in execution. The slow execution delayed 2024 restructuring, pulling the stock down 35% between September 2024 and May 2025. When the management slashed its annualized dividends by 56% to $1.75 per share from $3.99 in May 2025, the stock price didn’t react.

Why did BCE stock dip in April 2026?

The recent dip comes as TD Securities downgraded BCE to Hold from Buy. Analyst Vince Valentini lowered its average revenue per user (ARPU) growth estimates by 100 basis points for the next three years. ARPU is the reason why the telecom sector turned topsy-turvy. The regulatory change allowing small competitors to access BCE and Telus fibre infrastructure created price competition. While small players who had not spent billions building the infrastructure won, and large players lost as their return on investment (ROI) dipped.

The May 2025 dividend cut was necessary as BCE was spending more than 100% of its free cash flow (FCF) on dividends. Dividends are paid from the surplus cash left after all essential expenses are cleared. The dividend cut bought BCE time to improve its FCF and reduce its debt. The results are visible as it increased its FCF by 10% in 2025.

The role of ARPU in BCE’s dividends

The ARPU is the key source of profits for BCE. While the revenue growth depends on an increase in customer subscriptions, profits depend on an increase in ARPU. If each new customer spends more on BCE offerings, that customer will bring in higher margins for the same cost.

BCE has been looking to grow its ARPU by shifting its offerings mix. It bundles wireless, internet, broadband, media channels like Crave, and sports direct-to-consumer. Bell Canada has lowered its radio station revenue due to its low margins. It is shifting its revenue streams to high-margin areas of US fibre and enterprise artificial intelligence (AI) solutions. These should bring positive growth in ARPU.

Until this happens, you could invest your money elsewhere where the returns are quick and dividend growth is happening in the present, like Manulife Financial. The finance company grew its 2026 dividend by 10.2%.

Don’t buy BCE stock until this happens

BCE released weaker 2026 earnings per share (EPS) guidance despite expecting 1–5% revenue growth. This is because it has a lot to spend.

BCE’s 2026 revenue could grow to $25.2 billion in 2026 at the midpoint of revenue growth guidance. It expects to spend a little less than 15% of its revenue on capital expenditures, which comes to $3.7 billion. For 2026, it has committed to spend $1.2 billion on the construction of a 300-megawatt AI data centre in Saskatchewan, funded by a mix of cash and debt.

The first stage is expected to be operational in the first half of 2027. US-based Cerebras Systems will supply AI chips, and CoreWeave will provide AI computing capacity. BCE expects its AI solutions to generate $2 billion in revenue by 2028. BCE is also investing in expanding US fibre infrastructure.

Hoping there are no rule changes by the time BCE’s AI and US investments start earning recurring revenue, the telco could work towards dividend growth. Until you see strong revenue growth from these investments, you could hold off on buying BCE stock.

BCE has also changed its dividend policy to reflect its business model shift from telco to techno. The target payout ratio is now 40–55%, way below its 2025 ratio of 64%. You can hold off buying this stock till it achieves this target.

Investor takeaway

Holding off on buying doesn’t mean you sell your current holdings. It is a stock with potential to grow. However, the growth is delayed till the above targets of AI and US capex, dividend payout ratio, and leverage ratio of 3 times are achieved. Till that time, your money is better off invested in stocks that are growing now.