BT increased its dividend by a chunky 19% this morning. It remains an interesting high-yield play.
Before today, BT Group
(LSE: BT-A.L)
was already one of the top-yielding shares in the FTSE 100 index. Today's 19% rise in the interim dividend means it should retain that status for at least another year.
I'm pleased by today's second-quarter results as I highlighted BT's virtues in this article back in May.
Back then the shares were trading at 226.25p; they're now at 284p. What's more, shareholders received a tasty 7.6p dividend in September. And the payouts will continue; BT announced an interim dividend of 5.1p this morning. That suggests the full-year figure will be around 14.2p, putting the company on a 5% yield.
Of course, BT is on a high yield for a reason. Many investors are understandably concerned about its declining voice business. However, I'm not too worried. Total revenue moved up by 4% to £4.94bn while adjusted earnings jumped 13% to 6p a share.
BT's growth comes from its successful "new wave" businesses which now comprise 35% of turnover compared to 30% a year earlier. New wave means broadband as well as IT services for large organisations such as the NHS and Pepsico
(NYSE: PEP)
. Broadband is going along nicely, and BT reckons there is still plenty of room for growth here as only 50% of UK households have signed up for broadband.
IT services has become a substantial business with revenue growing 10% to £1bn. Ideally I'd like growth to be a little faster here as I think the decline of traditional voice may pick up pace in the next two or three years, but this division still looks promising nonetheless.
I think BT is riskier than many high-yield shares because the voice business seems so vulnerable. Still, I reckon there's a good chance that "new wave" will prosper in the long-term, so if you already have BT shares, I see them as a definite hold. New investors should probably watch for a modest dip before buying in.
> Big Tels | Five Reasons Why Telecom Shares Aren't Doomed
