BT share price under pressure as Jefferies flags dividend cut

Shares in BT Group (LON:BT.A) closed deep in the red yesterday, as analysts at Jefferies flagged a dividend cut at the former telecoms monopoly. The comments come after RBC Capital Markets sounded a more upbeat note on the company earlier this week, noting that the telco’s massive pension black hole is set to drop by billions of pounds.

BT’s share price lost 2.75 percent to close at 265.05p yesterday, underperforming the broader UK market, with the benchmark FTSE 100 index closing 1.05 percent lower at 7,447.21 points. The telco’s shares have lost more than 30 percent of their value over the past year, and are down by some 27 percent in the year-to-date.

Jefferies trims price target

Jefferies reiterated its ‘hold’ rating on BT yesterday, while trimming its price target on the stock from 280p to 265p, pointing to “weak prospects for a return to free cashflow growth”.

“BT promises value,” the broker’s analyst Jerry Dellis pointed out, as quoted by Citywire. “But we expect Q2 results to showcase the weak operating momentum that leads us to keep forecasts materially below consensus.” The comments come as the former telecoms monopoly prepares to update investors on its second-quarter performance on November 2.

Dividend cut could be on the cards

Jefferies’ Dellis further pointed out that BT’s incoming chairman faced the clear priority of repairing the telco’s relations with industry regulator Ofcom which is putting pressure on the company to improve the performance of its network division Openreach.

“This will require a very visible demonstration of network investment ranking above shareholders,” the analyst explained, adding that the broker believed that “a dividend cut cannot be ruled out”.

The comments come after Morgan Stanley also voiced dividend concerns about BT, partly on account of rising pension payments.

As of 08:04 BST, Thursday, 26 October, BT Group plc share price is 264.30p.