Is BCE Still a Buy? Here’s My Verdict

Down 60% from its peak, BCE stock now offers a 6.1% yield. Is this Canadian telecom giant a dividend trap or a buy right now? Here’s my verdict.

Key Points
  • BCE (TSX:BCE) stock's reset de-risked its balance sheet, freed cash flow, and brought free cash flow payout ratios to a sustainable range. The 6.1% dividend yield is well covered.
  • There are signs of potential stabilization. Second-quarter churn improved, ARPU is stabilizing, while Ziply Fiber and AI data center investments hold promise.
  • Depressed valuation multiples mean the dividend stock could be undervalued, and much of the sector's negative sentiment appears fully priced in.

Canadian telecommunications giant BCE (TSX: BCE) has tested the patience of income investors. Down more than 60% from its five-year peak and falling roughly 12% in September 2026 alone, BCE stock has lost investors’ money for some time now. However, something could be shifting behind the recent capital losses veil to make a potential rebound possible, and the stock now offers an eye-catching 6.1% dividend yield for a juicy passive income stream. Could this be the time to buy the dip?

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Why Canadian investors may buy BCE stock in October

Following May 2025’s painful 56% dividend cut, which reset BCE stock’s annual payout from $3.99 to $1.75 per share, many income seekers abandoned the stock. However, that capital allocation reset is helping to fundamentally repair the balance sheet. And the free cash flow payout ratio has gone down to a comfortable 43% to 48%, rendering the current 6.1% yield fully sustainable and well-covered by organic cash generation.

Operationally, clear signs of a bottom are surfacing. Second-quarter 2026 results revealed that postpaid mobile churn dropped to 1%, marking its lowest comparable level in three years as customer retention stabilized. Further, average revenue per user grew 0.7% year-over-year, as core subscription pricing remains resilient despite market noise today.

By curtailing low-margin domestic fibre builds following adverse regulatory wholesale access rulings, BCE is successfully redirecting capital into higher-return opportunities, including its acquisition of U.S.-based Ziply Fiber and its Bell AI Fabric initiative featuring a 300 MW data centre infrastructure footprint targeting Canadian sovereign AI workloads.

Ziply Fiber gave BCE a platform from which to expand with the U.S. market for growth, while artificial intelligence (AI) investments could generate high-margin cash flows.

The valuation also favours buyers entering the stock in October. BCE stock trades at approximately 11 times forward earnings and a forward enterprise-value-to-earnings before interest, taxes, depreciation and amortization (EV/EBITDA) multiple of 6.6 times, compared to trailing levels of 7.6 times and historical North American industry price-to-earnings (P/E) averages near 18 times to 20 times.

Given the heavy depreciation inherent in telecom networking, EV/EBITDA serves as a vital earnings and cash-flow valuation proxy, and current levels represent a historically depressed and undervalued entry point.

Why you may wish to stay away

Despite recent operational green shoots within BCE, cautious investors have valid reasons to remain hesitant right now. The primary headwind facing BCE is high potential for an extended national price competition. Quebecor continues its aggressive expansion of Freedom Mobile beyond traditional Quebec strongholds, and renewed discounting across wireless plans is a possibility. Price competition hurts margins and it is capping long-term revenue growth for the entire industry.

Additionally, corporate leverage remains elevated relative to historical norms. While net debt-to-EBITDA improved sequentially to 3.7 times in the second quarter, high debt levels leave the company sensitive to persistent elevated interest rates, which consume cash that could otherwise be earmarked for balance sheet deleveraging, accretive capital expenditures, or future dividend increases.

My verdict on BCE stock as an investment in October 2026

BCE stock is no longer the yield trap it was prior to its 2025 dividend adjustment. The painful reset successfully de-risked the cash flow payout, customer retention has reached a multi-year high, and valuation multiples reflect deeply pessimistic expectations.

While ongoing wireless price wars present real top-line headwinds, the stock’s discounted valuation and well-covered 6.1% yield provide a generous margin of safety. For contrarian income investors willing to endure near-term sector volatility, accumulating BCE stock in October offers a compelling blend of sustainable income and long-term turnaround potential.

Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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