Telecoms are having a rough time right now, zero doubt.
It is highly likely you see a lot of these companies scale back capital expenditures in an effort to increase free cash flow and support the dividend.
The company expects to pay out $3.87 per share in dividends in 2023. This means it needs around $3.53B in free cash flow to pay out common share dividends.
At the time of writing this, the company has only generated around $1.16B through the first 6 months of the year.
Last year, the company generated $3.23B in free cash flow, just barely enough to cover the dividend. When we look to guidance, it expects to grow cash flow by 2-10% this year. It would need to hit the high end of guidance to be able to cover the dividend.
It will need to close out the year with around $1.2B in free cash flow in each of the remaining 2 quarters to hit that guidance, and that guidance JUST covers the dividend.
It's quite a ways from its target. However, this could realistically just be higher cash costs coming in this quarter and the next quarters could be larger in terms of cash generation.
It is going to be a very interesting third quarter from BCE. If it comes in with low cash flows, investors may start to get worried. I'm not sure this company would cut the dividend if it realizes a shortfall in terms of cash over the short term, but it would certainly have to find other ways to pay it.