BT Group (LSE: BT.A) shares have divided the investment world for years. Many shareholders seeking dividend income have been happy to sit back and take the cash. Others have been scared off by a 70% share price fall over 10 years.
But BT shares have been reasonably stable over the past five years. A bit volatile, but an overall 7.6% drop compared to five years of dividend yields around 5% and above doesn’t seem too bad.
And in the past 12 months, BT has been setting the scene for a comeback. In that time, the share price has climbed 35%. It means a £10,000 investment a year ago would be worth around £14,000 today if we include dividends.
One-off boost?
This new success came mainly following full-year results in May 2024. CEO Allison Kirkby’s cost-cutting plans were bearing fruit sooner than expected. OpenReach broadband reached over a million premises in the fourth quarter alone, and BT passed its peak broadband capital expenditure.
That’s all good, but with hindsight it seems like it might have been a bit of a one-off. Since then, market response to BT’s updates has been lukewarm. The most recent, January’s Q3 update, resulted in a couple of days of share price falls. The results weren’t bad, but revenue fell a bit and adjusted EBITDA only rose modestly.
News of BT’s fibre-to-the-premises (FTTP) roll-out was positive, having reached 17m premises so far. Extending fibre to the last few metres should squeeze the best out of the network. But technology talk rarely seems to move investors, who are surely more focused on seeing it all turn into profit.
Show me the cash
If analysts are to be believed, that should happen in the next few years, with forecasts suggesting a 17% earnings rise by 2027. The forecast dividend is at 5.3% and expected to increase too.
But I see a few things that could cloud what looks like an otherwise rosy future. One is BTs perpetual debt, coupled with its long-standing pension scheme problems. Some people simply won’t invest in a company that carries too much debt, and I’m usually among them.
And any idea that BT has passed its years of big spend and can now sit back and rake in the revenue seems misguided. It might be true for OpenReach broadband, and for a few years. But a decade from now, might we be talking about the costs of the latest terabyte rollout? About quantum computing making those old installations of 10 years ago obsolete?
I’ve no idea, I’m just making things up. But technology is not going to stop costing big money.
What next?
Can BT shares repeat that 35% rise in the next 12 months? I think there has to be a decent chance they can. But I think it might need something a bit special from full-year results again, due on 22 May.
And for those investors who can just switch off, forget share price ups and downs, and take the dividends, I reckon BT has to be worth considering.
This post was originally published on Motley Fool
