Today saw the release of the half-year results through to the end of September for BT (LSE:BT.A). It also tied in with an update from Monday on the cost savings target set out previously. With plenty for the market to digest, the overall mood is positive. BT shares were up 5% to trade over 149p by mid-morning. The shares are up 40% over one year. Here are three reasons why I’m considering buying BT shares based on the latest results.
The dividend is back
The first reason is the resumption of dividends. If I rewind a few years, BT shares offered a dividend yield around the 3.5% level. As a result, it was a stock that income investors would buy and hold. Back in 2020, the dividend was scrapped completely. This was in part due to the pandemic, but also to help retain cash to focus on the rollout of full fibre broadband.
With the rollout now well under way (more of that later), the company is able to resume cash payouts to investors. In the latest results, this has been set at 2.31p for an interim dividend. So with a share price of 149.5p, the current dividend yield is 1.54%. This isn’t a game changer, but it’s a start. In line with a push for more cost savings, I wouldn’t be surprised to see this dividend per share increase in 2022.
This benefited BT shares as those looking for income likely have bought today.
Momentum is seen
Another reason for the recent rally was the update on the broadband rollout. It commented that “Openreach has now rolled out full fibre broadband to almost 6m premises and continues to lower its build cost”.
The numbers are impressive, with momentum clearly on BT’s side. Another point that impressed me was the fact that it already has 10 communication providers signed up as part of the network. These include large players such as Sky and TalkTalk.
The current plan is to reach 25m premises by 2026. This does sound a little ambitious to me, but the progress being made means that I shouldn’t discount this trajectory.
BT shares look appealing to me
The final reason why BT shares could rally further from here is due to good cost control. It has said that “it has delivered on its £1bn of gross annualised cost savings 18 months ahead of the March 2023 target”.
The half-year results also reaffirmed this, and revised down other future cost expectations. At a simplistic level, if a business can reduce costs but keep revenue at the same level, profitability will increase.
I should note that not everything was rosy in the results. Despite growth with Openreach, overall group revenue fell by 3%. Net debt also rose from the last half-year results by £614m to £18.2bn. The debt pile is large considering the size of the business. Higher interest rates in the UK going forward could make it more expensive to refinance or issue more debt.
Overall, I do think BT shares could offer me a good return in coming years, so am considering buying some shares now.
