Does 2024 go down as a good year for BT (LSE: BT.A) shares? The beleaguered FTSE 100 telecoms stock certainly needed one so here’s my verdict. Kind of.
CEO Allison Kirkby, who took over last February, battled hard to cut costs, boost efficiency and inject some much-needed focus into the sprawling organisation.
The BT share price started the year brightly before fading. It still ended 2024 some 18% higher. That would have turned a £20,000 investment into £23,600. But in fact investors have done better than that.
Throughout its troubles, BT’s maintained its reputation as a reliable source of dividends. The current trailing yield’s 5.48%. That would have added another £1,096 to that original £20k, giving a total return of £24,696.
This FTSE 100 stock’s fighting back
BT investors needed that. Yet over five years, the shares are still down a painful 25%.
I toyed with jumping on board the BT share price recovery last year, but ultimately didn’t. I don’t regret that decision.
Telecoms is a tough sector. Just ask FTSE 100 mobile phone giant Vodafone Group. It’s also highly competitive. BT’s spent £15bn rolling out its full-fibre Openreach network, only to see smaller alt-providers steal its customers away.
The group still hasn’t solved long-standing issues such as its huge pension liabilities and massive £20bn debt pile that dwarfs its market-cap of £14.3bn.
There was a sting at the tail end of the year, when BT downgraded full-year revenue guidance, blaming non-UK operations and a “competitive retail environment”. Interim revenues fell 3% to £10.1bn while pre-tax profits slumped 10% to £967m.
Happily, the dividend looks solid, with the interim payout hiked almost 4%, from 2.31p to 2.40p. Normalised free cash flows climbed 57% to £700m due to higher earnings, working capital timing and a tax refund.
This blue-chip generates plenty of cash
Kirkby says the group’s on track to meet long-term cost savings and cash flow targets, so we can assume the dividend’s safe. The forecast yield’s 5.59% for 2025, rising to 5.71% in 2026. That offers a solid base return, but what about the share price?
The 13 analysts offering one-year share price forecasts have produced a median target of just over 200p. If correct, that’s an increase of a whopping 37% gain from today. Only time will tell. Given BT’s cheap price to earnings ratio of just 7.96 times, there’s certainly scope for growth.
I’m a little surprised by this outburst of broker optimism. I’m expecting 2025 to be bumpy for the economy, as inflation stays high and consumers continue to feel the squeeze. The recent profit dip doesn’t strike me as a good omen either.
I’m sticking to my view that BT’s best avoided for me. This is partly due to portfolio balance. I hold a number of high-yielding FTSE 100 value stocks that are due a re-rating when the blue-chip index swings back into favour. I should probably diversify, just in case it doesn’t.
This post was originally published on Motley Fool
