While BT Group (LON:BT.A) posted first-quarter results largely in line with expectations, analysts remain concerned whether the telco’s prospects. The company’s share price has also continued its slide in the wake of the update and is about 23 percent down over the past year.
Analysts mull over Q1 results
Aaran Fronda at IG commented in a note this week that BT saw its share price continue its descent in the wake of its first-quarter results. The analyst has pointed to the telco’s pledge to to help the UK government with its plans to roll out superfast fibre broadband throughout the country by 2025, noting, however, that investors were likely “concerned that the plan may put pressure on its dividend to help finance the project”.
Interactive investor’s Keith Bowman meanwhile has noted that the telco’s defensive qualities and cash generation make it appealing to income seekers.
The analyst reckons that the group’s “historic dividend yield of around eight percent (not guaranteed), is highly attractive in the current low interest rate environment, but dividend cover of 1.6 times earnings is down from the 3-year average of 1.8 times, adding to current investor nerves”.
George Salmon at Hargreaves Lansdown also weighed in on BT in the wake of the results, noting that the shares offered “a prospective yield of 7.6%, so BT doesn’t need to offer much dividend growth”.
“The question is, can it sustain that payment these next few years, and then find a route to growth down the line?,” the analyst added.
Analyst ratings update
UBS reaffirmed the blue-chip telco as a ‘neutral’ this week, without specifying a target on the BT share price. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average valuation of 270.50p.
Barclays meanwhile sees the company as an ‘equal weight,’ arguing that while BT’s valuation provides a compelling argument to buy the shares, the company’s consumer division is under pressure and there is uncertainty over the planned roll out of fibre broadband.