Canadian dividend investors have not forgotten May 2025, when BCE (TSX: BCE) was forced to cut its annual dividend from $3.99 per share to $1.75 per share.
Valued at a market cap of $28 billion, BCE stock has returned -7% to shareholders over the past decade, even if we adjust for dividend reinvestments. In this period, the broader TSX index is up 233%.
BCE stock slipped 2% after the Canadian telecom giant reported its Q3 results last week. Let’s see if the blue-chip dividend stock can stage a comeback over the next 12 months and if you should own it for the 5.8% yield.
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How did BCE perform in Q3 2026?
In Q3, BCE reported revenue of $6.2 billion, an increase of 2.2% year over year. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) grew 0.9% to $2.8 billion.
However, if we adjust for Ziply Fiber, the acquisition BCE completed last year, EBITDA was flat. Moreover, adjusted earnings per share were down $0.05 and wireless service revenue declined by 1.3%.
Postpaid churn, which tracks how many phone customers leave, fell to 1.1%, the lowest third-quarter level in four years, as CEO Mirko Bibic said BCE pulled back on promotions.
Dividends are tied to free cash flow, which is the cash a company generates after it pays for operations and capital expenditures such as networks and equipment.
In Q3, BCE reported free cash flow of $854 million, down $149 million year over year, as capital expenditures rose by $439 million. BCE is building a 300-megawatt AI data centre in Saskatchewan and expanding its fibre network in the U.S.
Management forecasts free cash to range between $2.1 billion and $2.3 billion in 2026, allowing the telecom behemoth to maintain its annual dividend of $1.75 per share.
Given an annual dividend expense of roughly $1.6 billion, the payout ratio remains elevated at 75% and below the company’s policy of between 40% and 55%.
CFO Curtis Millen also warned that fourth-quarter capital spending will be higher compared to Q3.
Can the TowerCo Sale and AI data centres protect the dividend?
BCE announced that La Caisse will buy 49.9% of its new wireless tower company for $2.5 billion. BCE will retain control, and the deal is set to close in Q1 2027.
BCE ended Q3 with a net debt leverage ratio of 3.7 times, and the company aims to lower it to 3.5 times by the end of 2027. The net debt is down $680 million in 2026 to $39.6 billion.
Bibic said the contracts signed so far put Bell AI Fabric on track to become a business earning over $500 million in EBITDA. The first data hall should open in the first half of 2027, and BCE expects all halls to be running by the end of 2027. He also stressed that BCE builds its data centres only after a customer signs a contract.
At the CIBC Eastern Institutional Investor Conference on September 24, Millen explained what drives decisions inside the company, and stated:
“Free cash flow, net debt. That drives, frankly, our management compensation.”
The executives running BCE are paid on the same numbers that impact the dividend.
Is the BCE dividend safe for income investors?
The BCE dividend is well covered, though it remains elevated. The company is focused on lowering debt, which means investors should not expect dividend hikes over the next two years.
Analysts tracking the TSX tech stock forecast free cash flow to improve to $4 billion in 2029. So, if BCE stock is priced at 10 times forward FCF, it could return close to 50% within the next three years, after adjusting for dividends.
