BT Group (LSE: BT.A) shares have been through some of the FTSE 100‘s most impressive booms and busts. And they just seem to keep doing it.
In the past five years, the share price has dropped 52%. So might it be set for one of its periodic upswings now?
How much?
If I’d put £10,000 into BT shares five years ago, I’d be sitting on just £4,800 now. So I’d definitely be in the mood for a nice bull run.
Should you invest £1,000 in BT right now?
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Oh, hang on, I’m selling the telecom stock short. No, not literally, I just mean I’m not being fair to it.
BT would also have paid me five years of dividends. And they haven’t been bad at all. In fact, the forecast 6.5% for this year puts it in the FTSE 100 top 20.
Five years of dividends would have bumped my pot today up to £6,150. That’s still not a great result, clearly. All it does is ease the pain. But only in the way paracetamol might help if I drop a brick on my foot — not very much.
But… dividends
Still, those who invest for income might not care too much about what happens to their share prices. After all, if I buy shares today with the aim of just taking the annual cash to help fund my old age, and never intend to sell them, who cares if the share price falls?
Well, the kids might think I’ve left them a pile of junk in my will. But if they can do better, let them try.
So yes, being serious, I do think there’s an argument for just taking the cash and ignoring the share price. I mean, I can’t think of any other reason why anyone would be happy to have held BT shares for the past five years.
Can it keep going?
That’s as long as the dividend keeps up, of course. And the BT board does seem to make it a big priority. I’d rather they prioritise debt reduction, mind.
When earnings fell in the pandemic, BT had to suspend its dividend. But the very moment we started to sense the first wisps of recovery, back came the cash.
The thing is though, at the last count, the firm’s net debt had grown to £19.7bn. That’s 60% more than BT Group’s total market-cap. And we haven’t even peeked into BT’s gaping pension fund hole.
To me, that approach to debt, and preferring to line shareholders’ pockets with as much cash each year as they can, just seems the wrong way to run a company.
Happy income
Still, folks seem to be happy to buy the shares and keep taking the money each year. And if BT can keep the payments going, who can blame them?
And with a price-to-earnings (P/E) ratio as low as 7.5, there might even be some share price gains to come.
But I couldn’t handle that much debt. And I won’t be investing £10,000 to see where it goes in the next five years.
