So far, 2025 has hardly been thrilling for the BT Group (LSE: BT.A) share price. After closing at 144.05p on 31 December 2024, the stock now stands at 140.6p, down 2.4%.
BT shares beat the market
However, shares in the former telecoms monopoly have jumped 28.2% in 12 months, during which time the FTSE 100 rose 12.5%. That said, the Footsie has easily beaten BT stock over five years — up 14.8%, versus a fall of 6.2% for the owner of EE, Plusnet and Openreach. All figures exclude cash dividends.
Also, BT shares offer a market-beating cash return. Currently, BT shares deliver a dividend yield nearing 5.8% a year, well above the sub-4% on offer from London’s main market index. And reinvesting juicy dividends into new shares helps compounding, boosting’ returns over the years.
In the value graveyard?
Over the last decade or so, many broker reports warned that investing in European telecoms groups has produced inferior returns for shareholders. Indeed, some describe this sector as a ‘value graveyard’ or a ‘high-yield trap’.
The problem seems to be that while many telecoms stocks — including BT shares — deliver decent dividends, their share prices have seen multi-year declines. For example, the BT share price is no higher today than it was at the start of 2009. In other words, the company’s valuation is unchanged in 16 years. Yikes.
Though BT’s shares don’t look expensive to me today, nor do they look wildly cheap. Looking back, the ideal time to buy BT would have been in April 2024, when the share price seemed compelling value. Personally, I don’t see this stock moving upwards strongly in 2025-26. My expectation is it will fail to break above £2 without exceptionally good news.
For these and many other reasons — a balance sheet heavy with debt, plus a vast pension scheme to cope with — I’m not a buyer of BT right now.
One FTSE 100 stock my family already owns for passive income is Legal & General Group (LSE: LGEN). L&G was founded in 1836, so it has nearly 200 years’ experience selling life insurance and investment products. Currently, the group administers assets worth around £1.4trn for roughly 10m clients (both individuals and organisations).
While working in UK financial services, I became a big admirer of L&G’s management and business acumen. However, L&G’s share price has dropped 5.8% over the last 12 months and 24% in the last half-decade. Then again, like BT, this stock offers a tasty dividend.
With its share price at 234.9p, L&G delivers a whopping cash yield of 8.8% a year — one of the highest in the London market. What’s more, this payout has risen steeply since 2014. The company is also buying back its shares to boost future returns to shareholders. In addition, one of its core businesses (pension risk transfers) is doing record volumes.
On the other hand, as one of Europe’s leading investment managers, L&G and its shares usually suffer when asset prices slump. This was painfully demonstrated during the Covid-19 collapse of spring 2020. Even so, I intend to keep a tight hold onto this high-yield stock for many years to come!
This post was originally published on Motley Fool
