BCE (TSX:BCE) cut its dividend in 2025 in a move that angered long-time holders of the stock who had relied on BCE’s steady distributions to generate income. New investors are wondering if the depressed share price is an opportunity to buy BCE for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
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BCE stock
BCE trades near $33 per share at the time of writing. The stock is up from a 12-month low of around $29, but is down from the $73 it traded at four years ago.
What happened?
The surge in interest rates in 2022 and 2023 drove up borrowing costs. Higher debt expenses can reduce profits and cut into cash that is available for dividends. This is problematic for BCE and its peers that carry a lot of debt on their balance sheets. The communications sector borrows heavily to finance the billions of dollars of investments that are required to build and upgrade wireless and wireline networks used to deliver mobile and fibre communications services across the country.
In addition to the higher debt costs, the industry went through a nasty price war that reduced margins. Finally, the government cut off a valuable supply of new customers by reducing the number of international students and temporary residents to Canada. These people buy phones and sign up for mobile and internet services when they arrive.
All of these issues have contributed to the decline in BCE’s share price over the past four years.
Risks
Interest rates are down from the 2023 highs, but remain elevated. Further cuts by the Bank of Canada are unlikely this year due to the risk of inflation caused by soaring oil prices. South of the border, the U.S. Federal Reserve will likely keep rates steady, as well. This is why bond markets sold off in recent weeks, driving up bond yields. That makes it more expensive for companies to raise funds.
On the customer growth side, restrictions on immigration to Canada are expected to remain in place for some time. The population actually dropped in 2025 and is expected to remain flat this year, so there will be ongoing headwinds for BCE and its competitors. This could trigger another price war, which would put more pressure on margins.
If soaring oil prices cause an economic downturn, there could be a reduction in phone and mobile plan upgrades.
Opportunity
BCE sold its stake in Maple Leaf Sport and Entertainment (MLSE) for about $4.7 billion. Analysts had expected the company to use the funds to reduce debt, but BCE went out and spent the money on the acquisition of Ziply Fiber, an internet services provider in the United States. The deal initially ran into heavy criticism, but pundits have since warmed up to the potential for Ziply to expand and drive revenue growth for BCE. The company plans to more than double the number of Ziply Fiber subscribers through 2028.
At home, BCE’s media business is getting a boost from the popularity of the Heated Rivalry TV series that it shows on its Crave streaming service.
Population growth will have to resume at some point. Government restrictions on newcomers could ease in 2027 or 2028, providing a demand surge for mobile and internet services.
The bottom line
Investors who buy BCE stock at the current level can get a dividend yield of 5.3%. The distribution should be safe, so people searching for income might want to start nibbling on additional weakness.
Investors more focused on total returns, however, might want to look for other opportunities, as it could be some time before the turnaround efforts lead to a meaningful improvement in the share price.
