BCE's Delisting from S&P/TSX Preferred Share Index: A Wake-Up Call for Investors?

The removal of BCE Inc.’s preferred share series (BCE.PRH) from the S&P/TSX Preferred Share Index in January 2025 marks a significant turning point for the telecom giant. This exclusion, effective January 22, 2025, underscores a sharp decline in BCE’s financial health and investor confidence, with implications for its long-term stability.

The Delisting Context: A Financial Crossroads

The delisting followed BCE’s disastrous fiscal year 2024, during which the company reported a 19.43% decline in total shareholder return (TSR)—far worse than the Canadian market’s 11% return and even lagging behind its telecom peers, which fell by 12.7%. This underperformance was compounded by a catastrophic $2.6 billion one-off loss, which slashed net income to $344 million, a 84% drop from $2.26 billion in 2023. BCE also revised its 2024 revenue guidance to a 1.5% decline, signaling deteriorating operational health.

Why the Delisting?

While the S&P/TSX Index did not explicitly state the criteria BCE failed to meet, the delisting aligns with the index’s periodic rebalancing rules. Preferred shares are typically excluded if they no longer satisfy liquidity, market capitalization, or financial stability thresholds. BCE’s plummeting TSR, weak revenue outlook, and massive losses likely triggered a reevaluation of its eligibility.

The timing of the delisting also coincided with broader market turbulence. Investors grew wary of Canadian equities amid threats of U.S. tariffs, which amplified uncertainty about economic stability. Despite BCE’s preferred shares rising 1% weekly in late 2024, the delisting underscored a loss of institutional confidence.

Broader Implications for Investors

The exclusion from the S&P/TSX Preferred Share Index could further pressure BCE’s preferred shares. Index funds tracking the benchmark were forced to offload BCE.PRH, reducing demand and liquidity. Meanwhile, the index added CIBC’s preferred shares (CIBC.PR.F, CIBC.PR.G, etc.) to its portfolio, signaling a shift toward banks perceived as more stable.

For long-term investors, BCE’s struggles raise critical questions. Can the company recover from its financial missteps, or is it a victim of overvaluation in a saturated telecom market? Its revised revenue guidance and one-off losses suggest a need for strategic pivots, such as cost-cutting or M&A activity.

The Road Ahead

BCE’s path to recovery hinges on stabilizing its core operations. The telecom sector faces intensifying competition from players like Rogers and Telus, which have leveraged 5G investments to boost growth. BCE’s decision to revise its guidance downward highlights execution risks, particularly in its wireless and fiber broadband divisions.

Investors should also monitor BCE’s debt levels. With a $32.7 billion debt pile as of Q3 2024, any further earnings misses could strain its ability to service obligations. The delisting may also deter institutional investors, who often avoid stocks excluded from major indices due to reduced liquidity.

Conclusion: A Crossroads for BCE

BCE’s delisting from the S&P/TSX Preferred Share Index is a stark warning sign. Its financial decline—marked by a 19.43% TSR drop, $2.6 billion loss, and revised revenue guidance—suggests underlying structural issues. While the company has historically been a stable utility-like investment, its current trajectory demands caution.

The broader market’s reaction, including the S&P/TSX Preferred Index’s 2.25% rise in January 2025 amid BCE’s exclusion, signals a shift toward favoring financially robust issuers. For BCE to regain investor trust, it must demonstrate a clear plan to stabilize earnings, reduce debt, and compete effectively in a rapidly evolving telecom landscape. Until then, its preferred shares remain a high-risk bet.

Investors holding BCE.PRH may want to reassess their position, considering the delisting’s liquidity impact and BCE’s uncertain path forward. The telecom giant’s comeback will depend not just on financial fixes but on proving it can adapt to a market that no longer tolerates underperformance.