BT share price is a bargain but there are dividend growth risks

BT (LON: BT.A) share price has erased some of the gains made earlier this year as concerns about the company’s growth rose. The stock retreated to a low of 132.80p on Wednesday, the lowest point since February 13th. It has retreated by over 13% from the year-to-date high, meaning it is about to move to a bear market.

Growth and inflation concerns

BT Group is one of the biggest telecom companies in the UK. Its two key operating companies are EE and Openreach. The most recent results showed that the company’s adjusted revenue for FY23 came in at over £20.4 billion, down from the previous £20.6 billion. Its adjusted EBITDA dropped rose from £7.92 billion to over £7.9 billion.

BT Group’s revenue was supported by Openreach, its fiber business, whose revenue rose by 4%. Its consumer business revenue rose by 2% to over £9.49 billion while its enterprise and global revenue fell by 4% and 1%, respectively.

People invest in BT Group mostly because of its dividends. It has a dividend yield of about 5.48%. In 2021, the company declared a dividend of 7.7p, which was flat from the previous year. Analysts believe that BT Group’s dividend growth will remain unchanged in the coming years. Its policy is that its final interim dividend will be fixed at 30% of the full-year dividend. The CEO said:

“This is flat year-on-year given our current elevated level of CapEx, but it is in line with our progressive dividend policy to maintain or grow future dividends.”

BT Group’s revenue growth will likely be flat this year considering that the British economy is not growing as fast. Data published on Wednesday showed that the country’s inflation held steady in May. Consumer inflation rose by 8.7% while core inflation jumped to 7.1%.

BT share price forecast

BT stock by TradingView

The daily chart shows that the BT stock price has been in a strong bearish trend in the past few weeks. It has managed to move below the key support level at 133.50p, the lowest level on May 18th. The shares have moved below the 25-day and 50-day moving averages.

Further, the stock has moved below the 38.2% Fibonacci Retracement level while the Relative Strength Index (RSI) has moved below the oversold level. Therefore, the stock will likely continue falling as sellers target the next key support level at 120p.