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The BT share price has jumped 20% in 4 weeks. What’s next?

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White BT van in front of building
Image source: BT

It’s been a good month for shareholders of BT Group (LSE: BT.A). This popular, the widely held stock has surged since October. In fact, the BT share price is the FTSE 100 index’s fourth-best performer over the past month. (And this other very popular stock did even better, claiming second place).

The BT share price’s fall and rise

Formerly the UK’s state-owned monopoly telecoms operator, BT was privatised in several stages. This began with the primary flotation in December 1984. I was only 16 at the time, so I didn’t buy when the BT share price was initially set at 130p a share. But many adults I knew at the time did, convinced that this stock was being sold on the cheap. Hence, millions of Brits became part-owners of this business, valued way back then at £7.8bn.

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As I write on Monday afternoon, the BT share price stands at 163.9p, valuing the business at £16.3bn. Therefore, BT’s value has roughly doubled after almost 37 years. That’s not a tremendous return for nearly four decades of taking risk (but it does exclude cash dividends). That said, BT shares have been considerably lower — and higher — over the past 12 months.

On 1 December 2020, BT shares hit an intra-day low of 116.65p, their 52-week low. They then surged over the next seven months, peaking at an intra-day high of 206.7p on 23 June 2021. However, since this summer, the BT share price has been in steep decline. Four weeks ago, on Monday, 25 October, BT stock closed at 135.2p. That’s a collapse of more than a third (-34.6%) in four months.

Fortunately, the BT share price has come roaring back over the past month. At the current price of 163.9p, the stock has gained more than a fifth (+21.2%) in four weeks. However, the shares are down 7.9% over six months, but have gained more than a fifth (+20.7%) over the past year. Nevertheless, this stock is down by more than half (-54.3%) over the past five years. Ouch.

Would I buy BT today?

I don’t own BT shares today, but I did think they were too cheap four weeks ago. On Halloween, with the BT share price standing at 138.93p, I said I’d buy BT as “a fallen angel with growth potential”. Also, I mentioned that I looked forward to seeing BT’s quarterly results on 4 November. In these financials, BT said it would make an extra £2bn of cost savings by end-March 2024. It also lowered its expected capital expenditure for 2022/23 by £200m to £4.8bn. But the best news was the return of BT’s dividend, which was suspended during 2020’s Covid-19 crisis. The group intends to pay a full-year dividend of 7.7p a share, beginning with an initial pay-out of 2.3p. Hurrah.

At the current price, BT shares trade on a price-to-earnings ratio of 15.9 and an earnings yield of 6.3%. Also, BT’s dividend yield of 4.7% is higher than the FTSE 100’s 4% or so. I still don’t own BT stock, but I’d cautiously buy at present price levels. Of course, BT faces an uncertain future as it deals with its massive pension deficit and the high cost of rolling out ultra-fast UK broadband. Even so, I’m optimistic that these shares could be considerably higher in, say, five years’ time!

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Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

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