Are BT Group plc and this 5% dividend stock bargains of the year?

BT Group plc (LON: BT-A) is now yielding well over 6% a year and Harvey Jones highlights another bargain stock with an equally generous dividend.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

These are glory days for income seekers with the FTSE 100 trading on a yield of 4.1%, while these two dividend payers offer an even more generous yield than that.

Bad call

Telecoms giant BT Group (LSE: BT-A) currently pays an astonishing 6.47% income with cover of 1.8, but as so often is the case, the sky-high yield flags up underlying problems. The group’s share price peaked at 500p in December 2015 but trades at just 237p today.

The rot started with irregularities at its Italian business and only worsened when the scandal turned out to be worse than originally thought (don’t they always?). As my Foolish colleague Kevin Godbold points out here, BT continues to struggle with a £9bn debt mountain, stiff industry competition, and the need to constantly restructure to drive down costs and comply with regulator Ofcom’s demands.

Should you invest £1,000 in BT right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BT made the list?

See the 6 stocks

February’s figures showed a 3% drop in revenues and adjusted earnings across the three months to 31 December amid weaker trading in its Global Services division, and falling monthly revenues from mobile users. 

Italian job

This leaves the group trading at a forecast valuation of just 8.5 times earnings, deep into bargain territory. Investors should not bank on a spectacular comeback as earnings per share (EPS) are forecast to grow just 3% in the year to 31 March 2019, and 1% the year after. Competition is likely to intensify, rather than weaken. By then, the yield is forecast to hit 6.9%, provided it is sustainable.

Union approval to close its final salary scheme should offer some relief and unlike its telecoms rivals, BT should benefit from higher interest rates, which will shrink its £9bn pension deficit. A fix for its Italian problems and EE synergies could also boost growth. All of this may take time, but while you wait, there is that dividend.

Steady Eddie

Here’s a much smaller stock that is also trading at a bargain valuation, and with a juicy dividend to match. Eddie Stobart Logistics (LSE: ESL) has just announced full-year results for the 12 months to 30 November 2017, with a headline 9.4% increase in group revenues to £623.9m, and underlying EBIT up 17.4% to £48.5m, although operating profit fell by 1% to £26.6m.

The £450m logistics group has had a bumpy ride lately, its share price falling 20% in the last three months, with only the slightest of recoveries on today’s announcement. Yet chief executive Alex Laffey hailed “significant progress” in its first year as an AIM-listed stock, with strong underlying revenue growth, £41m of existing contracts renewed and £89m of new volume. It also completed acquisitions of iForce, Speedy Freight and Logistic People.

Rolling, rolling

The board proposed a final dividend of 4.4p, making a total of 5.8p for the full year, in line with its progressive dividend policy. 

The stock currently offers a generous forecast yield of 5.3%, with cover of 1.8. Fellow Fool Jack Tang has previously highlighted its low valuation and attractive yield. Its EPS are forecast to rise an impressive 20% over the year to 30 November 2018, then another 13% the year after that, when the dividend will hit 5.9%. Eddie Stobart looks set to carry on trucking.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

How to try and turn a £50K SIPP into a £250K retirement fund

Christopher Ruane explains how a long-term approach and careful share selection could potentially help an investor quintuple the value of…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

My £3 a day passive income plan for 2025

Christopher Ruane walks through his plan for next year and beyond of squirreling away and investing a few pounds a…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Can the FTSE 250’s Raspberry Pi boost my portfolio over the next decade?

This British technology stock in the FTSE 250 has exploded onto the London stock market and right now its future…

Read more »

Investing Articles

Does acquiring Direct Line make Aviva shares a buy?

A big acquisition should give Aviva greater scale and profitability, increasing the value of its shares. But is it an…

Read more »

Investing Articles

After a 25% decline in 2024, this FTSE 250 stock is top of my buy list for the New Year

Stephen Wright’s top investment idea is a FTSE 250 stock that’s down 25% this year in an industry that’s under…

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Retirement Articles

After a 20% gain in 2024, here’s how I’ll be investing my Stocks and Shares ISA and SIPP in 2025

Edward Sheldon is saving for retirement in a Stocks and Shares ISA and pension. Here’s how he’ll be investing in…

Read more »

Investing Articles

2 S&P 500 funds to consider for huge profits in 2025!

Are you optimistic about the S&P 500's prospects in the New Year? These quality exchange-traded funds (ETFs) could be worth…

Read more »

Investing Articles

A cheap FTSE 100 share that’s tipped to rebound sharply in 2025!

Recent price weakness means this FTSE share now offers stunning all-round value. I think it could experience a strong recovery…

Read more »