BT Group (LSE: BT.A) shares dropped close to 95p at their lowest in the 2020 stock market crash.
Investors who managed to pick FTSE 100 shares at their weak points that year could have made some big profits. So what about BT shareholders?
Well, today they’d be up by 17.6%. And a £10k investment would have grown to £11,760.
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Poor performance
There’d be some dividend cash too, so things should be a bit better. But some who bought at various points in the crash won’t have broken even yet.
And that was a year when buying almost any FTSE 100 stock could have brought big gains by today.
So does this mean BT is a dead duck? Or is it at a cheap buy with a good future?
Before and after
BT’s financial year ends in March, so the 2019-20 year was barely affected by the pandemic. And it should make it a good comparison point for the latest full year.
In 2020, BT reported revenue of £22.9bn. It’s declined a bit by then, as March 2023 revenue came in at £20.7bn. Still, not too far off.
Adjusted EBITDA in 2020 was £7.9bn, and in 2023 it was… £7.9bn. And it can’t get closer than that.
Dividends
The big difference is the dividend, which BT suspended in the pandemic. In 2019, BT had paid a handsome 15.4p per share, for a dividend yield of 6.9%.
Dividends have since come back, but still only at half the 2019 level. The 7.7p paid in 2023, with the same forecast for this year, would yield 6.8% on today’s share price.
For the yield to stay so close, the BT share price must have dipped. And that’s exactly what’s happened.
The small gain from the low point of 2020 hides the real pain. BT shares have lost 40% of their value since the end of 2019, before the Covid crash. And we’re looking at a 50% fall over five years.
Valuation
So, the dividend yield is about the same now as it was before the crash. And the price-to-earnings (P/E) ratio is only a bit higher. At the end of 2019 it was 8.5, and 2024 forecasts put it at 7.5.
That’s a low P/E compared to the FTSE 100 average, but there’s a good reason for that. Its net debt was £18.9bn at March 2023. Three years prior, it was £18bn. Again, not much change.
I work out a debt-adjusted equivalent P/E of about 20. And that might be fair for a stock with a high dividend yield.
A win for fundamentals
BT shares might have been all over the place in the past few years. But it looks like fundamental valuation has won through.
So, perhaps we really should ignore share price moves, and instead follow a company’s actual performance and all the valuation numbers.
And who knows, if BT gets back to dividend growth, maybe those valuations will head up again.
The debt still leaves me twitchy though.
