The BT Group (LSE: BT.A) share price is down 45% in the past five years. In fact, it’s been a very volatile stock over the years.
Looking back a bit further, the price broke through 500p in 2015 and, as I write, it’s down at just 125p. That’s a whopping 75% loss. And I don’t even want to talk about the dot com boom and bust.
All of these previous BT share price slumps have one thing in common. Each one was followed by a new surge. Could we be in for another one?
First quarter
Judging by the latest Q1 update, things seem to be going fine in 2023.
BT posted a 4% increase in adjusted revenue for the quarter, with a 5% rise in adjusted EBITDA. The biggest gains came from Openreach, with revenue up 8% and EBITDA up 12%
Openreach, it seems, is now 44% of the way to network completion. I think that’s impressive, considering the work and cost involved. And a take-up rate of 32% looks like good going too.
While highlighting the success of Openreach, chief executive Philip Jansen also said: “We continue to drive transformation across the group.”
And transformation, I think, is what BT needs. But I’m thinking of transformation in the way it handles cash and debt.
All about dividends
BT Group is, essentially, a dividend stock, at least with long-term investors. Anyone who bought with the aim of long-term share price gains has had their hopes dashed.
Even today, the BT share price is lower than it was at flotation in 1984. And that’s quite a shocker.
Yes, I know I’m harping on about the same thing I always do when I talk about BT. But paying out big dividends (currently 6%) while building up massive debt just doesn’t sit well with me.
The annual cash can build up very nicely. But the average BT share price since IPO will have been a good bit higher than today’s. And there are lots of dividend stocks out there that don’t come hand-in-hand with capital loss.
Will I buy?
When I buy FTSE 100 shares, I look for companies that share a few key things. I want to see good dividends that are strongly covered by earnings.
I like low debt, with net cash even better. That can make hard times easier, with less financial pain. We just need to look at Rolls-Royce Holdings to see what can happen.
I also prefer firms that don’t have to make huge capital investments each year just to keep up with the competition. I much prefer ones that can sell the same old thing, year after year, with fat margins.
And, ideally, I’ll see a decent long-term share price record too.
Not for me
BT pays good dividends, but it falls well short on the rest. So I won’t buy.
But, you know, for those who try to profit from BT’s share price ups and downs, it just might be a no-brainer time to buy now. Who can tell?
This post was originally published on Motley Fool
