While many stocks have suffered this year, BT (LSE: BT.A) shares have offered a glimmer of hope. The stock is up over 6% year-to-date. Over the past six months, BT shares have risen a healthy 11%.
While the past five years may have been dire for its shareholders with the shares down 40% since then, BT has made a solid recovery from its 2020 Covid-19 lows. So, in the tough market conditions we’re currently experiencing, would BT be a strong addition to my portfolio? Let’s explore.
Positive outlook
What most attracts me to BT is the positive outlook it provided in its recent full-year results. CEO Philip Jansen highlighted how Openreach continues to grow. It’s now reached 7.2 million premises with 1.8 million connections. And to add to this, BT’s 5G network now covers 50% of the UK population. As a potential investor, these look like solid foundations to build upon for the firm.
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Another reason I’m tempted to buy BT shares is the substantial dividends the stock provides. With a dividend yield of just over 4%, this sits above the FTSE 100 average. What makes this more attractive is rising inflation. While cash is depreciating, the strong dividends offered something of a hedge against rising rates.
BT has also announced it has finalised a joint venture with Warner Bros Discovery for its sports division. With this move, the business is optimistic it can create a subscription-based powerhouse. And should this be the case, the increased revenues would provide a boost for BT.
BT concerns
However, there are a few concerns I have. Firstly, it has invested over £5bn in capital expenditure in recent times in an attempt to upgrade its current network. And this, along with the large amount of debt the firm already has, could be an issue. With interest rates also on the rise, this could spell further problems for the business. However, while this investment may provide short-term headaches, in the long run, this cash injection should help BT thrive in the future.
As well as this, BT is also currently involved in a pay dispute with the Communications and Workers Union (CWU). This represents around 40% of the workforce. And CWU members have rejected a £1,500 flat rate rise, equating to between a 3% and 8% increase, with workers pushing for a figure closer to 10%. If no agreement is reached, there are plans for a strike action ballot in mid-June. A negative outcome of this saga would no doubt hurt the BT share price.
Why I’d buy
So, although the shares do carry risks, I think the stock could be a great addition to my portfolio. Its strong dividends offer a hedge against inflation. And the positive comments Jansen provided in its latest results make me optimistic. Add this to the potential revenue raised from its joint venture, and I would most certainly be willing to buy BT shares today.
