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Are BT Group (LSE: BT.A) shares purchase for buyers wanting to construct a retirement revenue pot? That’s a query I’ve tried to grapple with rather a lot through the years, and I maintain developing with conflicting solutions. Let’s see how issues add up after I apply my 5 key standards.
Dividend
An honest dividend is a should for me. And BT’s forecast 4.7% dividend yield seems to be adequate. Different issues equal, I’d choose an even bigger yield… however that’s the place my different checks are available.
BT lately introduced a 2% dividend rise to eight.16p, and mentioned it intends “to take care of or develop the dividend every year” relying on different components. If BT reaches £3bn of annual normalised free money stream by the tip of the last decade as deliberate, I believe the dividends must be secure. I rating a cross on dividends.
Cowl
BT posted 18.8p in adjusted earnings per share (EPS). That covers the dividend 2.3 instances, which I see as simply satisfactory. There’s a large discrepancy between that adjusted determine and a fundamental EPS of 10.8p although. That may occur and isn’t essentially an issue. However we noticed the identical final yr with fundamental EPS of 8.7p changing into an adjusted 18.5p.
It’s not a motive to reject BT. However I’d control it. It doesn’t cease me giving BT a cross on dividend cowl.
Historical past
A historical past of progressive dividends helps enhance my confidence over future dividends. Sadly, that’s the place BT stumbles a bit. BT paid a 15.4p dividend for 2019. It was slashed when the pandemic hit, however then got here again at a lot decrease ranges. Even the 2025 dividend was solely a bit greater than half of 2019’s.
Cowl was skinny again then, and I reckon a reduce was wanted. However I believe that ought to have been handled rather a lot sooner, and I’ve to mark this one as a fail.
Forecasts
Forecasts aren’t high-confidence issues. However not less than the analysts anticipate dividend rises for the subsequent couple of years. And that matches in with what BT was saying in its FY outcomes announcement.
Forecast earnings present good cowl too, in order that’s one other cross for a rating of three out of 4 thus far.
Debt
Lastly, one thing that may kill a dividend within the occasion of a monetary squeeze. BT’s debt is nearly excessive sufficient to carry precise tears to my eyes. At 31 March, internet debt reached £19.8bn. That’s one other enhance, although the corporate put the rise right down to £0.8bn in pension fund contributions. Oh sure, BT has an enormous pension fund deficit too. A minimum of that’s falling and anticipated to be cleared by 2030.
However that internet debt determine is greater than BT’s whole market-cap. It’s a transparent fail.
The rating
BT scores three out of 5 on my guidelines, with debt being my greatest concern. I nonetheless suppose buyers who’re much less anxious about debt and may simply maintain taking the dividends ought to contemplate BT for long-term revenue, and I think they’d do properly. However I can’t, so I’m out.
