What’s Telling Me To Buy BT Group Plc Today

Royston Wild considers the investment case for BT Group plc (LON: BT-A).

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Today I am looking at BT Group (LSE: BT-A) (NYSE: BT.US), and deciding whether to sign the Premier League’s latest star up for my shares portfolio.

Triple-play momentum keeps on rolling

Despite mixed performances across its major divisions, BT Group showed in last month’s interims that profits continue to march higher. Although revenues nudged 1% lower in April-June, to £4.45bn, adjusted pre-tax profit increased 5% to £595m.

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Particularly exciting is the progress BT Group is making in becoming a major multiple-services provider across the television, broadband and telephone segments. The company secured around half of all new broadband additions during the last quarter, and now boasts some 1.7m customers.

And with the potential to connect around 16m homes, a feat achieved through heavy investment in fibre technology across the country, BT Group is well positioned to generate massive upside. The decision to offer free access to its BT Sport television channels to all its broadband customers could prove a masterstroke in this regard.

On a related note, the telecoms giant announced this month that subscriptions to its sporting package had surpassed the one million mark in the three months since it began to accept orders in May.

And with BT Group also inking a wholesale agreement with Virgin Media just under a fortnight ago, the company can expect a weighty influx of new orders. Virgin has some 3.8m customers for BT to entice, and the move means that the latter’s sport channels can now be accessed through all of the UK’s major television platforms.

Telecoms giant set fair for chunky earnings growth

BT Group is expected to illustrate earnings pressure in the near term before rebounding thereafter. City number crunchers expect earnings per share to dip 5% in the year ending March 2014, to 25p, before snapping 13% higher next year, to 29p.

And in my opinion, the company offers fantastic value for money at current levels. Carrying a P/E rating of 13.1 and 11.6 for 2014 and 2015 respectively, this compares extremely favourably with a prospective average of 15.9 for the wider fixed telecoms sector. It also comfortably beats a forward readout of 15.8 for the FTSE 100.

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To sweeten the deal, BT Group also comes with an enviable record of meaty annual dividend increases, which it is expected to maintain at least over the medium term. Indeed, payouts of 10.95p and 12.43p in 2014 and 2015 correspondingly are up from 9.5p in 2013. These payments offer decent — if not outstanding — yields of 3.3% and 3.7%, just ahead of the 3.2% prospective FTSE 100 yield.

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> Royston does not own shares in BT Group.

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