BCE (TSX: BCE) likely disappointed a ton of Canadian passive-income investors when it decided to reduce its payout by more than half last year. Understandably, it was a painful move that just had to be done to make progress with the turnaround moving into high gear.
And, of course, one had to think such a big dividend cut was just a matter of time, given the trajectory of the stock at the time and just how swollen that dividend yield had become. Fast forward close to a year later, and BCE shares seem to be settling down, now down just 3% in the past year or up 1% year to date.
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Telecoms look untimely, but still bountiful and cheap
Indeed, it feels like things have bottomed out since BCE ripped the band-aid off that was the dividend reduction. With top rival Telus (TSX: T) also giving in with a proportional dividend reduction of its own, it’s clear that the telecoms are a very different kind of trade going into late 2026. Now, the dividend yields as they stand today are still quite attractive. What’s more enticing, though, is that they’re now very well-covered, with, dare I say, potential to grow from here if all goes well with their comeback efforts. At the time of this writing, shares of BCE yield 5.41%.
That’s far more than you’d get by owning the rest of the market. With Canadian bank yields at a bit of a low point after a tremendous bull run, I think that there’s reason to give the telecoms a closer look now that the dividend is on steadier footing and investors look forward to efforts that could help the telecom titans march higher again. Of course, the prospects for the telecoms aren’t great, especially if satellite connectivity looks to not only take share from the wireless market but also from broadband.
Indeed, when it comes to such disruptive technologies, it’s hard to know for sure which of the physical economic moats stand to erode most. For BCE and Telus, it feels like nothing, but negativity is baked into the current share prices. Unless you’re comfortable with catching a falling knife with shares of T after its more recent dividend reduction, I’d be more inclined to nibble on BCE stock. It feels like the bottoming-out process has already begun with strong support just shy of $30 per share.
Getting too cheap?
Of course, the more promising, though still underwhelming, technicals aren’t the only reason to give BCE stock a second look. The shares are starting to look like a deep-value bargain, trading at 4.8 times trailing price to earnings (P/E).
Even given industry headwinds that stand to weigh on earnings growth (shares go for more than 12.0 times forward P/E), I still think that BCE is one of the names that could reward investor patience with considerable dividends. The stock has already shed 55% of its value, and the dividend isn’t as generous as it once was.
You could certainly get a more attractive yield from a covered call ETF with a prettier-looking chart. But at the end of the day, I think the stage is steadily being set for a recovery.
The bottom line
Whether it’s leveraging efforts, cost-saving opportunities in AI, the U.S. fibre business, or a move into AI data centres (a long-term wild card to keep tabs on), the company has plenty of options to bolster its free cash flow enough to justify dividend hikes again.
In short, there is hope for those willing to stay invested for the long haul.
Still, debt repayments must come first. And, for many, it’s going to be a boring, multi-year effort that’s going to test investor patience. With a safe dividend, a plan, a dirt-cheap multiple, and a proven top boss, I think BCE stands out as more of a buy than a sell, especially for those impressed by the yield.
