BCE Inc (TSX:BCE) is something of an enigma among Canadian stocks. On the one hand, it’s one of the nation’s best known companies, one half of a telecommunications duopoly it operates with Rogers. On the other hand, its stock has been an utter disappointment, having cut its dividend once in recent memory, and sporting a payout ratio that argues another cut may be necessary.
BCE’s yield certainly looks enticing if you go by the “advertised” dividend. The payout is $0.44 per quarter, or $1.76 per year. At today’s stock price of $33.99, that produces a yield of approximately 5.2%. The yield certainly appears to be there – at least on a backward-looking basis.
The problem is what we see on a forward-looking basis. Specifically, we see very little. BCE has long struggled with a lack of pricing power, and that’s unlikely to change any time soon. Its media holdings are becoming less valuable over time, and its core business is stagnating. So, there is little reason to see this company turning things around any time soon. In this article, I make the case that BCE Inc is at risk of yet another dividend cut.
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History of the dividend cut
BCE Inc’s most recent dividend cut occurred in 2025, being announced in one of the company’s earnings releases. The dividend went all the way from $0.9975 to $0.4375 – a greater than 50% cut. The reason for the cut was poor earnings results, and a high payout ratio. In the earnings release in which the cut was announced, the company posted:
- A 4.2% decline in earnings.
- EBITDA unchanged year-over-year.
- Free cash flow [FCF] up considerably.
While the improvement in FCF was nice to see, the fact remained that earnings were far lower than dividends payable.
Where we are now
Having looked at the causes behind BCE’s most recent dividend cut, we can now turn to its more recent results.
In its most recent quarter, BCE delivered:
- 2.3% EBITDA growth.
- 1% growth in adjusted EBITDA margin.
- 25% growth in net income.
- 0.1% cash from operations (CFO) growth.
- 49,168 new fibre customers.
- 10% free cash flow growth.
As you can see, the numbers were a little dull, with positive but not explosive growth observed across the board.
The most important thing, though, is that BCE has now got its dividend well below its earnings level. Last quarter, the company paid $0.44 in dividends while earning $0.69 in EPS. That is a pretty sustainable payout ratio of 64%. As long as BCE can keep its earnings coming in at the level they are now, they could deliver an adequate 5% per year return. But remember: this is a company with few growth opportunities. The prospect of the company shrinking cannot be discounted.
The bottom line
My personal bottom line on BCE Inc is that I see better opportunities elsewhere. At 12.4 times earnings, it certainly looks cheap, but it isn’t that cheap for a company with no growth prospects whatsoever. Personally I’d rather invest in something with a little more potential than this.
