Two months ago this share offered an annual dividend per share of $ 3.99, or a return of 11.5% because it was traded near his 14-year-old layer. High -interest shares bear risks of dividend reductions, and for BCE (TSX: BCE), It was on hands.
BCE underwent a turn from Telco to techno with a heavy leverage and high interest costs. The weak macro -economic environment, the delay of immigration and a price war delayed the outcome of the lead time, which BCE cost a dividend reduction of 56% and a change in the dividend policy.
BCE’s trip from high yields to sustainable yields
Things were not rosy for BCE, even before 2024, when a new regulation disrupted the competition of the telecom industry. Between 2020 and 2022, BCE $ 14 billion spent on capital expenses (Capex) on 5G network infrastructure to get the first hover. It took the risk of increasing leverage and to increase its dividend benefit than 100%, thinking that it would later cash in the infrastructure.
| BCE | Dividend |
| 2025* | 105% |
| 2024 | 125% |
| 2023 | 111% |
| 2022 | 108% |
| 2021 | 105% |
| 2020 | 89% |
BCE plan, however, reached a setback in April 2022 when the Bank of Canada caught the interest from 0.25% to 5%. It was confronted with a new setback in August 2024 When the BCE telecom regulator obliged to share his infrastructure with competitors at wholesale prices, which disrupted the return at $ 14 billion in Capex. The company continues to ask that the regulator is destroyed.
At the same time, BCE began to restructure his business, reducing exposure to the regulated space and the exposure in the technology room was increased. It has disposed of non-core companies, the Radiostations, the Bronwinkels-lowered people more than 4,000 jobs and acquired American internet services, Ziply Fiber.
However, Macro-towind slows down the restructuring, because it is difficult to find the right buyer and the right price for its capital-intensive companies in a weak market. The perfect example is the delay in selling Northwestel for $ 1 billion.
To maintain this delay, BCE resorted to a dividend reduction of 56% to channel its cash flow in $ 1.8 billion in interest charges and acquisitions. That explains the dip in the dividend yield.
Why is BCE still a good stock to invest in the long term?
BCE is now aimed at lowering costs and balance debt. It has therefore reduced the target in the long-term dividend payments to 40-55% of the free cash flow (FCF) of the previous 65-75%.
It is planning to increase FCF by concentrating on business services, such as Ateko Managed Services, Cyber ​​Security and Bell AI Fabric, which are suitable for colocation and data center connectivity services. Bell AI Fabric launched his first artificial intelligence (AI) data center in June.
The turnover of the second quarter reflects the shift in Focus. The income of the communication and technology services (CTS) increased by 1% as an increase in the turnover of the internet and business services more than a decrease in wireless turnover of 0.3%. Bell Media’s turnover increased by 3.8% as an increase in digital AD and DTC subscription income that compensates for a decrease in the turnover of TV and radio stations.
The company is vast and now the restructuring effect is being demonstrated. BCE has adjusted its dividend investment plan (drip). Instead of offering treasury shares, the shares of the market return and it distributes as drop shares, which will help to reduce the dilution of equity.
How much annual passive income can this give this share?
If you buy 100 BCE shares for $ 3,408 in 2025, you can get $ 175 in annual passive income with an annual dividend per share of $ 1.75. The company cannot grow its dividend in 2026. However, it can accelerate its dividend growth as soon as the AI ​​and cyber security business FCF stimulates high margins and cyber security FCF. It did this in the past. After having beaten dividends by 48% in 2008, BCE increased the dividend by 116% in 2009 to make up for the reduction. History could repeat itself.
Among the Canadian telco’s, BCE offers exposure to shareholders to the American markets and connectivity of data centers. It has to collaborate of Bijenkorf digital technologiesBuzz High-Performance Computing and Perplexity to offer AI infrastructure. I am Bullish on his AI focus, which could be a catalyst for his winning margins in two to five years.
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