Image source: BT Group plc
Before full-year results on Thursday (22 May), the BT Group (LSE: BT.A) share price had gained 15% year to date. And a lot us thought there could be more to come before the year was out.
But as I write on results morning, the shares are down around 3%. That’s despite BT hitting expectations for the year and expanding its full-fibre rollout targets.
Maybe it’s because CEO Allison Kirkby told us that “revenue declined year on year driven mainly by lower international sales and handsets.” In these days of US tariff fears, anything hinting at international sales pressure does seem to spook investors. That’s understandable.
Adjusted EBITDA did grow a bit though, by 1.3%, and normalised free cash flow rose 25% to £1.6bn.
Getting it right
I’ve been strongly critical of BT in the past. That was mainly over dividends that I didn’t see it able to keep paying against a background of mounting debt.
There’s nothing wrong with dividends in themselves. In fact, I love them. But when they contribute to destroying shareholder value by sending the share price plummeting, perhaps the strategy is worth re-examining. It’s sobering to think that over the past 10 years, the BT share price has slumped by around 65%.
But in the past couple of years, I reckon BT has been doing a lot of the right things. One of those was slashing the dividend in 2020. Without that, BT would still be stuggling to cover the dividends with earnings even five years on.
But now, the dividend just declared of 8.16p per share is covered 2.3 times by adjusted earnings per share of 18.8p. That’s a 5% yield on the previous day’s closing price, with forecasts showing progressive rises to come.
What to expect
BT’s guidance for 2026 suggests adjusted revenue of around £20bn, with EBITDA of £8.2bn to £8.3bn and free cash flow of around £1.5bn. Those are largely unchanged from 2025. And maybe that contributed to the lukewarm market reception, with investors hoping for faster growth.
Looking further ahead, BT expects free cash flow to climb to around £2bn in 2027, and up to £3bn “by the end of the decade.” That’s a key measure for me. I want to see enough cash to convince me the company will be able to cover its future capital expenditure needs and keep the dividend growing.
Oh, and keep servicing that debt, which I mustn’t overlook. At 31 March 2025, net debt was barely changed at £19.8bn. That’s still a huge sum, higher than BT’s market cap. And I fear it could weigh on the stock for a long time to come. Plus, the overall flat guidance for 2026 leads me to foresee a possibly weak year ahead for the share price.
But I do see the risks as being mainly short-to-medium term. And while BT’s turnaround still has some way to go, I rate it as one for long-term investors to consider now.
