Is This 5.8% Yielding TSX Dividend Stock a Buy for Passive Income?

A 5.8% yield looks great, but BCE’s real story is whether its post-cut dividend is finally sustainable.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published July 6, 9:42 pm EDT

Key Points

High telecom yields can be risky because prices are falling while network costs and debt stay high.
BCE cut its dividend in 2025, aiming for a more realistic payout tied to free cash flow.
Free cash flow is stable and business demand is growing, but dividend safety still depends on execution.

Earning $580 a year in passive income from a $10,000 investment sure sounds tempting. That’s what a 5.8% dividend yield promises before taxes. For retirees, Tax-Free Savings Account (TFSA) investors, or anyone trying to build monthly cash flow, that kind of yield can look like an easy shortcut.

But high yields introduce a second question: Is the dividend safe?

Passive income is not just about the biggest payout today. It’s about getting paid again next quarter, next year, and through the next market cycle. A dividend that gets cut can leave investors with less income and a lower share price. So, where should investors look?

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Phone it in

Telecom stocks often attract income investors because the services are essential. Canadians still need wireless plans, home internet, business connectivity, and data networks. The Canadian Radio-television and Telecommunications Commission (CRTC) said high-speed internet and cellphone services have never been more central to Canadians’ daily lives and livelihoods. It also noted that Canadians are choosing faster internet speeds and cellphone plans with more data.

Statistics Canada shows the pressure on the sector from another angle. Cellular service prices fell 2.6% in May 2026 from the year before, while internet access service prices rose just 0.3%. On an annual average basis, cellular service prices declined 1.7% from 2024 to 2025, even as the all-items Consumer Price Index rose 2%.

That is good for consumers, but tougher for telecom companies. Lower prices, heavier network investment, high debt costs, and intense competition all make ensuring dividend safety more difficult. That is why investors looking at a high-yield telecom stock need to focus less on the headline yield and more on free cash flow.

BCE

Enter BCE (TSX: BCE). BCE stock owns Bell Canada and remains one of the country’s largest telecom companies. It provides wireless, internet, fibre, media, business communications, cybersecurity, and emerging artificial intelligence (AI) infrastructure services. For passive-income investors, BCE stock has long been a familiar TSX dividend name.

But the old income story changed. BCE stock cut its dividend in 2025, reducing its annualized common-share dividend to $1.75 per share. The current quarterly dividend is $0.44 per share, yielding 5.8% at writing.

The cut was painful, but it also made the dividend more realistic. A high yield backed by weak coverage is not reliable passive income. A smaller dividend with better coverage can be the better long-term setup.

Current catalysts

Management is trying to shift the company toward sustainable free cash flow growth, lower leverage, and higher-return growth areas. BCE stock has said its current $1.75 annual dividend is part of a more disciplined dividend strategy, with a long-term payout target of 40% to 55% of free cash flow. It also expects to distribute about $5 billion in common-share dividends over the next three years.

The latest quarterly numbers were mixed, but not broken. In the first quarter of 2026, BCE stock generated $804 million in free cash flow, up 0.8% from $798 million a year earlier. Operating cash flow fell, mainly because of higher taxes paid from strategic divestitures and higher interest costs.

The business still has real strengths. Bell’s fibre, wireless, business markets, and AI-related infrastructure give it long-term relevance. In the first quarter, Bell Business Markets revenue rose 9.7%, helped by strong growth in AI-powered solutions revenue. The valuation also looks undemanding. BCE stock trades at roughly 4.5 times trailing earnings at writing.

Foolish takeaway

So, is BCE stock a buy for passive income? For investors who want maximum safety, probably not yet. But for investors who understand the risk, BCE stock is more interesting after the dividend reset than it was when the yield looked unusually high. The current payout is smaller, but more sustainable. The stock also gives investors exposure to essential connectivity, fibre, wireless, and AI infrastructure.

A 5.8% yield can be a warning sign. BCE stock has already taught investors that lesson. The better question now is whether the new dividend can last, and if free cash flow keeps improving, BCE stock could become a more credible passive-income stock again.