BT (LSE: BT.A) shares have had a solid run so far in November, rising almost 8% in the last 30 days. This newfound momentum contrasts with the relatively poor performance of the stock over the last six months, in which it has fallen 19%. Broaden this horizon to five years, and the shares are down 55%.
Given the recent rise, is now the time for me to add this stock to my portfolio? Let’s investigate.
BT’s value
One of the main draws of BT shares is their notably low valuation. At present, they’re trading with a price-to-earnings (P/E) ratio of 6.5, considerably below the FTSE 100 average of around 14. This looks cheap to me.
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However, when lookign at this figure against peers Vodafone and Deutsche Telekom, which trade on P/E ratios of 2.2 and 5.4 respectively, the value doesn’t seem as obvious.
That being said, BT shares do come with a whopping 6.5% dividend yield. Such a healthy yield could be a great way to top my portfolio up with some passive income, and reinvest the earnings back into the stock to compound my earnings.
My concerns
One of the things that concerns me the most about BT is its enormous debt pile. In its latest financials, this figure sat just shy of £20bn. That’s almost double its current market cap of £11.8bn.
With interest rates at record high levels, this could spell big trouble for BT. If higher rates translate into increased debt repayments, hundreds of millions of pounds could be at risk. This could seriously damage its bottom line. Not only that, it could also reduce the company’s ability to invest in new growth initiatives.
Reasons I like it
There are plus points though. In October, BT announced that its customers will soon gain access to EE broadband deals. This merging of products and services is great news for customers, especially given EE broadband is consistently top-ranked by various independent third parties.
This partnership should help BT retain more of its current customers when their existing packages come up for renewal. Additionally, it has the potential to attract new customers from competitors, leveraging EE’s strong reputation.
BT is a household name in the UK, leading the telecoms industry. This strong brand presence is an undeniable asset. While this doesn’t translate into tangible value per se, the company’s solid reputation and established customer base are both appealing to me.
Furthermore, BT has taken significant steps in broadening its 5G network coverage throughout the UK. Encompassing more than a thousand towns and cities nationwide, BT’s 5G network establishes the company as a leader in the pursuit of faster and more extensive connectivity.
The verdict
For me, BT shares look attractive at their current price. In my opinion, they present good value while delivering a strong dividend. The company’s debt burden is slightly alarming, but I’m willing to overlook this given the numerous positives of the stock. If I had some spare cash lying around, I’d buy somme shares at the current price.
