BCE’s Earnings Rise 16% in Q4: Is the Dividend Safe?

BCE (TSX:BCE)(NYSE:BCE) pays investors an exceptionally high dividend, which today yields more than 12%. But the big question is whether it’s safe, especially as the company announced a big acquisition to expand into the U.S. last year. It reported earnings earlier this month, and let’s take a closer look at whether they suggest the payout is safe. Here are the key takeaways from the latest quarterly numbers:

• $6.4 billion in revenue for the quarter, which is a decline of 0.8% year over year.
• 16.1% increase in net earnings to $505 million. This is due to lower asset impairment charges, foreign exchange hedging gains, and changes in other non-recurring items.
• 3.9% increase in adjusted EPS, to $0.79. However, full-year net earnings dropped sharply due to impairment charges.
• 151,413 net new mobile device activations.
• 34,187 net new retail Internet subscribers.
• 56.1% decline in postpaid phone activations, which the company blames on lower immigration-driven demand and greater competition.
• 19% increase in digital revenue for Bell Media.
• 18% increase in Crave subscriptions, up to 3.6 million.

Key numbers from the company’s outlook for 2025:

• -3% to 1% change in revenue.
• 11% to 19% increase in free cash flow.
• $3.99 annual dividend remains unchanged.

Breaking down what this all means

Overall, it was a pretty uneventful quarter for BCE in Q4. The company’s revenue was flat, earnings improved but that was largely due to non-recurring items. When stripping out those items, its adjusted EPS showed modest single-digit growth. It wasn’t a bad quarter, but there was nothing terribly exciting about it either.

The big consideration for investors is what lays ahead for BCE. The company’s forecast for 2025 suggests any kind of growth might be a best-case scenario for the business. What is encouraging, is that BCE is expecting free cash flow to increase. But what does that mean for the dividend? Last year, its free cash flow was around $2.9 billion. If it increases by between 11% to 19%, that means investors can expect free cash to be somewhere between $3.2 billion and $3.5 billion this year. That’s a good improvement, but it’s also less than how much the company pays out in cash dividends over the course of a full year — $3.8 billion. It’s looking like another shortfall, but that doesn’t mean that the dividend will be cut.

The company’s forecast doesn’t include any impact from its pending acquisition of Ziply Fiber, which is set to close in the latter part of the year. That’s the big wildcard for the business, how that plays out, how much money BCE may need to pump into that business. That will determine how safe the dividend really is, and whether BCE may need to cut it to help fund its U.S. growth strategy. Based on all the numbers and the forecast, I don’t see a reason for BCE to cut its dividend, at least not yet. For now, it looks safe, even though free cash isn’t that great. Investors will, however, want to monitor that Ziply acquisition and see if there are any early signs of trouble from that.

So, should you buy the stock?

BCE makes an intriguing option for investors. It hasn’t been this cheap since 2010, but with it potentially spending heavily on U.S. expansion, there are no shortage of question marks around the business today. It’s still a good dividend investment because with a yield this high, even if BCE does cut the payout, you may still be collecting a high rate of dividends. And if the company’s financials improve and the Ziply acquisition pays off, there could be a ton of upside for the stock.

This isn’t the safest stock to be holding given the tailspin it’s been on — shares of BCE are down more than 30% in the past 12 months. But if you’re wiling to be patient and hang on, for at least a couple of years, this may be a worthwhile stock to buy. BCE is a top telecom company in Canada and that’s not likely to change anytime soon. While it may be a bumpy ride for the stock in the months ahead, given how cheap it is, it may be trading at too attractive of a price to pass up right now.