Is BCE Stock a Buy After Its Dividend Cut?

It’s not every day we see a giant like BCE slash its dividend by more than half. For investors who counted on Bell as a cornerstone of their income portfolios, this move is a gut punch, but one that should have been expected.

I believe BCE’s cut sends a clear message: stability is gone, and the company is now focused on solving real business pressures, not just pleasing shareholders.

The reasons behind this decision are serious. Shrinking cash flow, rising debt, and tougher market competition have forced BCE to change its approach to survive and adapt.

This will have a ripple effect across Canadian portfolios, as this was one to the top dividend stocks in the country. It raises an unavoidable question: does BCE still deserve a spot in our accounts after such a massive shake-up?

Understanding the Dividend Cut: What Happened and Why

Once one of the most reliable income stocks in the country, BCE has slashed its dividend by over 50%.

The quarterly dividend dropped from 99.75 cents per share down to just 43.75 cents. For reference, that means the annual payout falls from $3.99 to only $1.75 per common share.

Here’s a quick before-and-after:

Period	Quarterly Dividend	Annual Dividend
Before May 2025	$0.9975	$3.99
After May 2025	$0.4375	$1.75

Why did BCE make this move? Management pointed to “intense price competition,” regulatory changes, and macro pressures weighing heavily on profits. The competitive landscape is very apparent. Smaller carriers have put big telcos under extra pricing stress, especially as Canadians keep hunting for better deals in this poor economy.

However, I believe it was the severe mismanagement of the company’s debt that caused it. Look below to their annual interest expenses.

On top of that, BCE has been dealing with big costs for new spectrum, higher debt, and a sharp need to protect its balance sheet. With interest rates higher and the Bank of Canada still keeping borrowing costs above pre-pandemic levels, the old payout just wasn’t sustainable given BCE’s current cash flow.

Management framed the cut as a reset. A painful but necessary step to help stabilize finances, regain flexibility, and hopefully prevent more drastic action down the line. The only difficulty is they were way too late. They spent too much time trying to please shareholders over simply making strong long-term decisions for the company. They’re paying for it now.

A major cut like this is rare for a TSX blue chip. The message is clear: even dominant players aren’t immune to outside pressures, and protecting the long-term health of the business sometimes trumps keeping investors happy in the short run.

For those of us buying individual stocks, it’s a reminder to look beyond yield and check under the hood.

Telecom Resilience vs. Profit Pressures

BCE’s bread and butter remains wireless, internet, and TV, alongside a hefty chunk from business solutions. Our telecom sector isn’t a hotbed of fast growth, but BCE has held its ground with one of the country’s broadest networks.

Wireless still leads for revenue. We’ve seen subscriber growth slow as the Canadian market matures, making it tougher to boost numbers without aggressive promos. Churn rates matter more than ever, and BCE’s are fairly stable for now, but still aren’t overly impressive.

Internet and TV bring in steady income, but cord-cutting continues to bite into legacy TV. More Canadians are switching to streaming, squeezing ARPU for traditional TV. High-speed internet is a bright spot, though, especially as BCE invests in fibre upgrades.

Here’s a quick breakdown of BCE’s main revenue lines:

Segment	Market Trend	BCE’s Position
Wireless	Slow growth, fierce competition	Top market share, declining ARPU (see chart below)
Internet	Ongoing fibre demand	Rapid rollout, urban focus
TV	Declining subscribers	Losing ground to streaming
Business	Enterprise services steady	Strong relationships, moderate growth

Competition has heated up. Rogers and Telus aren’t sitting still, and regional challengers nip at market share. To keep its lead, BCE has pumped billions into 5G and fibre, including acquisitions south of the border. We have to ask ourselves, will these capital expenses pay off?

Cutting the dividend gives BCE extra breathing room to support those investments. It also helps deal with profit pressure as growth gets harder to find. The landscape’s not easy, but the core business is still holding together, if a bit battered.

For now, BCE is trading near its 52-week low, after a significant decline. The reasoning? A very poorly managed company in a exceptionally difficult market to operate in.

Balance Sheet and Cash Flow Analysis Post-Cut

Let’s look at the real impact of BCE’s dividend cut on its operations. Dropping the annual payout from $3.99 to $1.75 per share frees up billions in cash that we used to see go directly to shareholders each year. This move alone is expected to redirect approximately $2 billion annually.

With that extra cash, we are seeing BCE focus on the essentials: shoring up its balance sheet and addressing debt. The Canadian telecom market is capital-intensive. Network upgrades and spectrum auctions are not cheap. By easing the dividend burden, BCE creates more room to invest in next-generation tech while facing less pressure from higher rates on its debt.

Stronger cash flow means BCE can chip away at its high leverage ratio, which had made many investors, myself included, uneasy. It also reduces the risk of future credit downgrades, as the company is hovering around junk grade status.

By investing this saved capital into its network and managing debt, BCE is signaling that it wants to compete, not just tread water. This also puts BCE in a better spot if the Bank of Canada holds rates higher for longer, since lower debt means less interest cost drag.

For Canadians looking at dividend growth, we’re not back to the golden days yet, but BCE is at least setting a more sustainable pace in a tougher market.

Market Response and Valuation Post-Cut

The market didn’t panic when BCE cut its dividend by over 50%. In fact, the stock price jumped as much as 5% after the news broke, which tells us a lot about how investors were already positioned for this outcome. It was less of a shock and more of a sigh of relief, as it ended months of uncertainty around the payout.

From a valuation perspective, BCE’s numbers have shifted. The company’s price-to-earnings (P/E) and EV/EBITDA ratios have come down, now sitting below their five-year averages. Here’s a snapshot comparing BCE to its main peers:

Company	Current FWDP/E	EV/EBITDA	Dividend Yield (Post-Cut)
BCE	11	7	5.8%
Rogers	13	8	5%
Telus	19	7.5	7.6%

BCE’s reset yield stands at 5.8%, which is lower than before but in line with comparable names.

Analysts have mostly argued that the cut was essential for longer-term stability. If management can deliver on promised cost cuts and growth from new technologies, there’s room for shares to rerate higher, especially if debt comes down and free cash flow improves.

We also need to ask if the stock is now “de-risked.” The overhang from the big dividend is gone, and if BCE starts to re-accelerate dividend increases, that could offer additional upside beyond just the yield. F

or those willing to take a contrarian stance, these moments—when sentiment is low but fundamentals are resetting—can sometimes be the best entry points.

Buy, Wait, or Walk Away

Let’s be blunt—BCE’s dividend cut was big. For many Canadians relying on steady dividends, the drop to $1.75 per share from $3.99 feels like a cold splash of water.

Yet, that move could secure the balance sheet and free up cash for network upgrades, potentially giving BCE a healthier future footing.

If you’re an income investor

I get it—the big reason you might own BCE is for reliable, tax-efficient payouts. After this dividend chop, I’d think hard before doubling down. The company needs a new management team, as the current one has dropped the ball hard.

For growth seekers

BCE is ploughing money into next-gen technology, but the upside isn’t guaranteed or quick. If you have a longer investing horizon and a higher risk tolerance, a small position here could make sense while you watch for signs of a recovery, but I wouldn’t get your hopes up.

Overall, it would be a hard pass from me until the company gets a new management team in place that can effectively navigate the environment they’re in. This current team has made a lot of errors, some extremely detrimental to shareholders, and I simply have no trust they’ll be able to do the right thing moving forward.