It’s been quite a while since income investors used to view the Canadian telecom firms as market darlings and a way to score a generous, growing dividend alongside a decent amount of capital gains. Just over four years ago, the telecoms entered one of the worst bear markets in recent memory, and to this day, things have not improved a great deal.
A name like BCE (TSX: BCE) has been one of the harder falling knives to catch, and while a bottom might continue to be elusive, with shares at risk of plunging below $30 per share again (that’s a multi-year depth) after the latest tumble, questions linger as to whether it’s still worth betting on the telecom’s turnaround as pressures continue to mount and AI infrastructure investments look to cost a considerable sum.
Make no mistake, the rise of AI data centres, especially in Canada, is big and could mint the next cash cows.
But, at the same time, you’ve got to pay (a lot) to play in that arena. And one could argue that it’s not the best time to make the transition, especially when you consider that the telecom top dogs might still find themselves on the descent for some years to come, as consumers feel the pressure, and competition hits from left, right, centre, and even from up above, with satellite connectivity making considerable strides, and rumours swirling around an all-satellite mobile service coming at some point in the down the line.
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BCE stock is in a strange spot
There’s no shortage of uncertainty, and as you may know by now, there isn’t much else that investors hate more than uncertainty. While I have no idea how practical it is for satellites to go straight to the device, I think the risk in cash flows should be considered. Arguably, the risk has already been priced in with BCE at these historic depths.
In my view, satellite connectivity isn’t the new cord-cutting. Now that the expectations “treadmill” has slowed pretty much to a halt with an earnings bar that, in my opinion, couldn’t be lower, I think BCE could be a winning stock, even if its turnaround doesn’t suddenly kick into high gear in the second half of 2026 or into 2027.
Too cheap to ignore at $30 per share
Much of the damage (that includes the dividend cut) is already in, and what makes me most bullish is the potential for the firm to shore up serious extra cash with the dividend now reset in a more stable spot and plenty of savings being made across the organization.
And with less wireless capital expenditures, at least compared to the past, expected ahead, I’d say the firm has more than enough wiggle room to pursue new growth projects (think AI infrastructure) while also leveraging the technology to drive more cost savings. If all goes right, count me as unsurprised if BCE starts increasing its dividend rapidly once evidence of a successful turnaround that’s working its way into future quarters.
The bottom line
In my view, the most painful part is in the books. Now, the firm needs to prove to investors that the new AI-age BCE is up to the task. I think the 5.8% yield dividend is worth collecting while you wait for what I think will be a steady multi-year turn.
