BCE (TSX:BCE) stock has spent much of the past few years testing the patience of income investors. Rising debt, higher interest costs, weak share-price performance, and a dividend reset have all damaged what was once viewed as one of Canada’s dividend darlings.
However, BCE stock may finally be starting to look attractive again. The reset dividend offers a 5.62% yield, while the lower payout gives the company more room to fund its operations and improve its financial position.
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Why BCE stock looks tempting again
BCE is one of Canada’s big telecom stocks. The company provides subscription-based services for wireless, wireline, internet, and TV services.
These services produce a recurring revenue stream and remain essential for households and businesses. If anything, the essential nature of those services has only increased in recent years.
BCE is also investing heavily in areas that could unlock the next stage of growth. That includes expanding its fibre network, building its presence in the United States through its Ziply Fiber acquisition, and developing AI infrastructure through Bell AI Fabric.
There’s something for income investors, too. BCE has paid dividends without fail for over a century. As of the time of writing, BCE stock offers a post-reset yield of 5.62%.
That’s lower than the double-digit unsustainable yield that BCE offered prior to its reset, but still attractive when compared to other Canadian dividend stocks.
In short, BCE’s yield falls in the middle ground of being attractive enough to offer a high yield, yet sustainable enough to fund growth investments.
More importantly, the reduced dividend is now better aligned with the cash BCE generates. The company established a long-term target of paying 40% to 55% of its free cash flow through dividends.
That leaves BCE with more cash to reinvest in the business and gradually repair its balance sheet.
Why BCE still needs more financial breathing room
One of the problems still facing BCE is competing uses for its limited cash.
BCE’s wireless and fibre networks still need to be funded. Additionally, Ziply Fiber’s expansion in the U.S. still needs funding. BCE’s spending on AI data centres and other infrastructure is another area that could generate long-term growth.
Finally, BCE is paying interest on its existing debt while maintaining its dividend.
That’s a lot of competing priorities to balance. Higher free cash flow would make that easier, and BCE is making some progress on that front.
In fiscal 2025, BCE generated $3.18 billion in free cash flow. That’s a solid 10% increase over the previous year. In fiscal 2026, BCE is expecting that number to rise to between $3.3 billion and $3.5 billion.
Progress has been slower than expected. During the first quarter of 2026, free cash flow increased by only 0.8% to $804 million. That’s positive movement, but not enough to prove that BCE has entered a period of cash flow growth.
The cash flow improvement investors need to see
Apart from seeing BCE stock reverse its slide, the one development investors should watch is whether BCE can generate enough cash flow to cover its dividend and those investments while still reducing its debt.
Prospective investors should keep in mind that telecoms like BCE are capital-intensive businesses. Funding infrastructure upgrades and fibre networks is expensive.
In other words, investors shouldn’t expect BCE to eliminate that debt altogether but instead continue moving in the right direction.
The year-over-year cash flow improvement and maintaining the current dividend are great examples of that.
Should you buy BCE stock today?
For those investors who have an appetite for risk and have longer timelines, there is an opportunity in owning BCE and being paid to wait for that turnaround.
This is especially true for investors who believe that the dividend reset was the low point for holding BCE stock.
Those investors may be comfortable collecting the dividend and waiting for management’s strategy to produce results.
More risk-averse investors, however, may be better suited to invest in one of Canada’s dividend stocks that offers a similar yield but with less risk.
