The BT (LSE: BT.A) share price is finally smashing it. After years of decline, it’s bounced back to life in recent months. Are we now looking at a red-blooded recovery stock?
For years, BT Group was the ultimate falling knife. Investors who made a grab for it got badly hurt. The shares peaked at around 500p in November 2015. They opened at 125p at the start of this year.
They’re up 33.81% in three months and 14.13% over 12 months, but today’s price of 142p’s still way below its former high.
I don’t see this year’s recovery as a dead cat bounce. BT still has a heap of problems, but new CEO Allison Kirkby is working hard to bring the business round, although it will take time and success is far from assured.
FTSE 100 income star
One positive is that BT’s huge capital investment in rolling out its full-fibre network’s starting to recede, marking what Kirkby’s described as an “inflection point”. Plans to cut £3bn of costs will help.
Today, BT offers one of the highest income streams on the FTSE 100. The trailing yield is 5.5%, handsomely covered 2.4 times by earnings.
Better still, it looks sustainable. In 2024, the board increased it by 4% to 8p a share. BT shares are forecast to yield 5.8% this year, rising to 5.94% in 2025.
As full-fibre spend declines, free cash flow should rise, further securing shareholder payouts. Despite the recent share price bump, the stock also looks cheap, trading at just 7.6 times earnings. Yet there are problems too.
Revenues and profits have been bumpy, with the latter falling 31% to £1.1bn in 2024. Although that was largely due to a large one-off impairment charge, the five-year trend’s been weak, as my table shows.
| 2020 | 2021 | 2022 | 2023 | 2024 | |
| Revenues | £22.9bn | £21.33bn | £20.85bn | £20.68bn | £20.80 |
| Pre-tax profit | £2.35bn | £1.80bn | £1.96bn | £1.73bn | £1.19bn |
| EPS | 23.5p | 18.9p | 12.9p | 22.0p | 18.5p |
This isn’t going to change overnight . Q1 2025 revenues rose a meagre 1% to £2.1bn, while pre-tax profit fell 3% at £520m.
Dividend value play
As the UK’s dominant telecoms market player, BT faces competition from smaller, nimbler arrivals, with so-called ‘alt-nets’ snapping at its heels.
BT still offers three quarters of all broadband lines but is losing them at the rate of almost 500,000 a year. Connections should get a lift from the Labour government’s ambitious housebuilding plans though.
Finally there’s the long-standing problem of its £20bn-plus debt and unwieldy pension scheme. Neither can be magicked away.
BT’s back on track after a truly horrendous time. Like a lot of investors, I wish I’d bought it before the recent bump. Today, I’m not so sure. It still faces a lot of challenges and they’ll take some years to sort out. The dividend would reward me while I wait for the next leg of the recovery. Yet I’m sure the FTSE contains far better opportunities, and I don’t think I’ll pursue this one today
