Dividend Sustainability in the Canadian Telecom Sector: Is the Global X Equal Weight ETF a Buy for Income Investors?

The Canadian telecommunications sector has long been a magnet for income-focused investors, thanks to its trio of dominant players: BCE Inc. (BCE), Rogers Communications Inc. (RCI-B), and Telus Corporation (T). These companies, collectively known as the "Big Three," have historically offered attractive dividend yields, but recent financial pressures and sector-wide challenges have cast a shadow over their sustainability. For investors eyeing the Global X Equal Weight Canadian Telecommunications Index ETF (RING)—which pays a monthly dividend of CAD 0.075 per share—the question is whether this payout reflects sector resilience or signals deeper vulnerabilities.

The ETF's Dividend: A Mixed Signal

The RING ETF's CAD 0.075 dividend, while modest, is a product of its equal-weighted structure. Unlike market-cap-weighted funds, RING allocates equal exposure to BCE, Rogers, and Telus, ensuring no single company's performance disproportionately skews the fund's returns. This structure is both a strength and a risk. On one hand, it mitigates overexposure to a struggling firm; on the other, it dilutes the impact of a high-performing one.

The ETF's recent dividend cut—from CAD 0.12 to CAD 0.075 in June 2025—mirrors BCE's 56% dividend reduction in 2024. This sharp decline underscores the sector's fragility. BCE, which accounts for ~33.87% of the index, has been forced to deleverage after years of aggressive acquisitions and debt accumulation. Its payout ratio now sits at ~70% of free cash flow, a marked improvement from unsustainable levels but still elevated for long-term stability.

Telus, the most financially disciplined of the three, maintains a 7.6% yield with a payout ratio of 60–75%, supported by its diversified business model (wireless, wireline, healthcare, and international ventures). Its recent 3.5% dividend hike in early 2025 and plans for 3–8% annual growth through 2028 suggest a more sustainable path. Rogers, meanwhile, faces a steeper climb. Its 5.7% yield is bolstered by a 34% share price drop post-Shaw acquisition, but its payout ratio remains precarious, hovering near 100% of free cash flow.

Sector-Wide Pressures: Debt, Competition, and Margin Compression

The Canadian telecom sector is grappling with a perfect storm: rising debt, regulatory scrutiny, and a price war ignited by Quebecor Inc.'s Freedom Mobile. Combined, BCE, Rogers, and Telus hold over CAD 104 billion in debt, a burden exacerbated by declining average revenue per user (ARPU). Telus reported a 3.7% ARPU drop in Q1 2025, while Rogers' Q1 revenue growth stalled at 2%.

To address these challenges, all three companies are pursuing aggressive deleveraging strategies. BCE sold its Maple Leaf Sports & Entertainment stake for CAD 1.1 billion, while Rogers offloaded CAD 7 billion in infrastructure assets to Blackstone. These moves are critical for restoring credit ratings and freeing up capital for dividends. However, the pace of debt reduction remains uncertain, and any misstep could trigger further dividend cuts.

RING's Dividend: A Signal of Sector Stability or Deterioration?

The ETF's CAD 0.075 payout must be viewed through the lens of its underlying holdings' divergent trajectories. While Telus's disciplined approach offers a lifeline for RING's income potential, BCE's and Rogers' struggles weigh heavily. The ETF's slight discount to NAV (-0.16% as of August 22, 2025) suggests market skepticism about the sector's ability to sustain current yields.

For income investors, the key question is whether the sector's deleveraging efforts will stabilize dividends. Telus's 3–8% annual growth targets through 2028 are encouraging, but BCE's and Rogers' trajectories remain uncertain. A 50% dividend cut for BCE in 2025, as some analysts predict, would further erode RING's payout.

Investment Implications

The RING ETF's CAD 0.075 dividend is a double-edged sword. On one hand, it reflects the sector's current reality: a mix of caution and resilience. On the other, it highlights the risks of investing in a sector where margin compression and debt overhangs are persistent threats.

For conservative income investors, RING may offer a diversified play on the sector's eventual recovery, particularly if Telus's growth plans materialize. However, the ETF's equal weighting means investors are exposed to BCE's and Rogers' vulnerabilities. A better approach might be to selectively invest in Telus while hedging against sector-wide risks.

For aggressive investors, the ETF's low valuation (a 0.16% discount to NAV) and the sector's attractive yields (4.97% for BCE, 5.7% for Rogers, 7.6% for Telus) present a compelling case. The key is to monitor the companies' deleveraging progress and dividend policies closely.

Conclusion: A Cautionary Buy

The Global X Equal Weight Canadian Telecommunications Index ETF's CAD 0.075 dividend is a signal of both sector-wide challenges and potential for recovery. While Telus's disciplined approach offers a glimmer of hope, BCE's and Rogers' struggles underscore the sector's fragility. For income-focused investors, RING is a buy—but only with a long-term horizon and a willingness to weather volatility. The ETF's equal weighting provides a balanced exposure, but it also means investors must accept the sector's mixed bag of risks and rewards.

As the telecom sector navigates its deleveraging phase, the sustainability of its dividends will hinge on the Big Three's ability to adapt to a competitive landscape that shows no signs of easing. For now, RING's payout is a barometer of this ongoing transformation—and a reminder that high yields come with high stakes.