BCE Inc. (TSX:BCE)(NYSE:BCE), a leading communications company in Canada, which is also known for offering a high dividend, recently reported its second‑quarter results.
In early August, the telecom giant reported that net earnings rose 6.6% to $644 million. Management said that improved operating performance and lower capital expenditures helped generate $1.15 billion in free cash flow, 5% higher than a year earlier. The fibre‑optic and wireless networks that fuel BCE’s revenue remain capital‑intensive, so the uptick in cash generation reassure investors that the company’s current dividend remains sustainable.
The bad news for investors is that the company recently reduced the rate of its quarterly dividend. And on an annualized basis, the payout is now $1.75 per share, down from the $3.99 it previously paid. The cut reflects both regulatory requirements tied to the Ziply transaction and BCE’s determination to maintain financial flexibility as it continues to invest in 5G and broadband. Even after the reduction, BCE still yields more than many Canadian blue‑chip stocks and expects to deliver mid‑single‑digit revenue growth and adjusted EBITDA gains in 2025.
For income‑seeking investors, BCE remains a compelling dividend stock despite the scaled‑back payout. The company’s cash flows should benefit from the accelerating migration of customers to premium fibre‑to‑the‑home and 5G services and from cost efficiencies as legacy copper networks are retired. At the same time, the reduced dividend rate lowers the risk of an eventual dividend freeze if economic conditions deteriorate.
Plus, the acquisition of Ziply opens up growth opportunities for the business in the U.S., which can allow BCE to be a good option for both dividend and growth-oriented investors. Year to date, shares of BCE Investors are up around 9%.
