BCE needs a 50% dividend cut, Desjardins says

Desjardins Securities analyst Jerome Dubreuil says forget the scalpel, what’s needed is a machete.

That’s the analysts opinion when it comes to the anticipated dividend cut at BCE (BCE Stock Quote, Chart, News, Analysts, Financials TSX:BCE).

Dubreuil, ahead of the company’s Q1, 2025 results, due May 8, says a 50% dividend cut is required for BCE to deal with the headwinds that Canada’s telecom industry is facing.

“We believe there is a significant probability that BCE will cut its dividend this quarter,” he wrote. “While we would view a dividend cut positively as it would simply align the capital allocation strategy with the firm’s FCF generation and balance sheet situation, this potential event nonetheless brings significant risk ahead of the quarter. A dividend cut of at least 50 per cent would be a positive step in our view, but it nonetheless represents a meaningful risk to shareholders. At current prices, we would still need additional comfort about the potential improvement for EBITDA growth in Canada before becoming decisively more bullish on the stock. It has to be at least 50 per cent. While it seems inevitable that BCE will reduce its dividend in 2025, the timing and magnitude of the cut remains uncertain. A cut must not be seen as negative news in our view, but rather as an alignment of the capital allocation strategy with the existing state of the business. We believe there is a risk that BCE cuts its dividend by less than 50 per cent — a situation we would consider negative as it would likely not satisfy institutional investors while retail investors would be disappointed regardless. We now model a 50-per-cent cut, but we believe the company may want to consider a larger reduction due to the following.”

As reported by the Globe and Mail, Dubreuil April 21 maintained his “Hold” rating while cutting his price target on BCE from $38.00 to $36.00.