Sometimes, you don’t need to ignore a quality dividend stock just because its payouts have changed. If that extra financial flexibility helps build a healthier business, its long-term appeal could actually improve.
That’s how I’d look at BCE (TSX: BCE) today. With its dividend already reset, the company is now directing big capital toward growth drivers like fibre networks, U.S. broadband, digital media, and artificial intelligence (AI) infrastructure. And there are early signs of progress across some of those businesses, while its operating cash flow is also improving.
Let’s take a closer look at BCE’s latest cash-flow trends, what they mean for its over 5% dividend yield, and whether the company’s changing strategy strengthens its investment appeal.
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BCE stock and its dividend
As Canada’s biggest communications company, BCE has a broad presence across wireless, fibre Internet, media, enterprise solutions, and the U.S. broadband market through Ziply Fiber.
Although BCE stock has gained 8% over the last month, it remains down roughly 3% over the last year. With this, it currently trades at $32.83 per share, giving the telecom giant a market cap of $30.5 billion.
That longer-term weakness has helped push the company’s annualized dividend yield to 5.4%. That translates to a quarterly dividend of $0.44 per share, with its annualized payout at $1.75 per share.
What BCE’s fundamentals tell dividend investors
In the latest quarter ended in June, BCE’s operating revenue inched up by 1.5% year-over-year (YoY) to nearly $6.2 billion. Its service revenue grew 4.3%, reflecting the contribution from Ziply Fiber and growth at Bell Media. On the flip side, product revenue fell 16.3% from a year ago.
The telecom giant’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) also edged up 1% YoY to $2.7 billion. Meanwhile, its adjusted net earnings climbed 2% to $604 million.
Last quarter, BCE’s core Canadian telecom operations saw some weakness as its Bell CTS Canada revenue declined 4% YoY, while the segment’s adjusted EBITDA fell 3.1%. However, cost reductions helped cushion that pressure and lifted its adjusted EBITDA margin to 46.1%.
More importantly for dividend investors, BCE’s cash flows from operating activities jumped 11% YoY to nearly $2.2 billion. The picture gets more complicated when you look at free cash flow. It fell 9.5% YoY to just over $1 billion as BCE’s capital expenditures surged more than 41% to nearly $1.1 billion.
Why BCE’s dividend deserves a closer look
While that free cash flow decline shouldn’t be ignored, we shouldn’t forget that much of BCE’s recently increased capital spending is supporting projects that could strengthen the business over time.
The company is building Bell AI Fabric data centres in Canada while expanding Ziply Fiber’s fibre-to-the-premise network in the United States. In the June quarter, BCE also added nearly 55,000 residential fibre-to-the-home Internet subscribers, contributing to a 14.2% increase in internet revenue.
Beyond fibre, the company’s other growth businesses are also gaining traction. Combined revenue from its Ateko and Bell Cyber businesses jumped 29%, while Bell Media revenue grew 8.9%.
Still, its free cash flow remains the key number for dividend investors to watch. BCE expects to generate between $2.1 billion and $2.3 billion in free cash flow in 2026, representing a 28% to 34% decline, mainly due to higher spending on its Saskatchewan AI data centre.
Even with that near-term pressure, the telecom giant continues to target an annualized dividend of $1.75 per share.
Keeping all that in mind, for investors comfortable with near-term volatility due to free cash flow pressure, BCE stock could be an attractive dividend investment to consider for the long run.
