Is it time for me to sell BT shares?

Manika Premsingh’s investment in BT is loss-making right now. Is it time to sell? Or should she wait a while for a recovery?

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I bought BT (LSE: BT-A) stock in early 2020. This is before we knew the pandemic would happen. Even at that time, it was not exactly the best performing stock around. Its share price had been dropping for years. But I still saw a case for buying it. 

The first reason was its double-digit dividend yield. My calculations show that even if the BT share price continued to decline a bit in the future, the yield was big enough to more than make up for it. In other words, net positive returns on the stock looked all but assured at the time. Also, after years of Brexit-related limbo, it appeared like the UK was finally ready to grow fast. The anticipation was already evident in the FTSE 100’s gains in December 2019. This could have spilled over into BT’s growth too. Its biggest money spinner is the crucial fibre-optic broadband network for the UK, which could thrive during a boom. 

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BT shares’ pandemic crash

However, soon we found ourselves in a pandemic slump. Not only did BT roll back its dividends, the stock crashed. And by October 2020, it was trading at penny stock levels. I continued to hold the stock during this time, and was soon rewarded for it. Come November 2020, and like many other recovery stocks, it started rallying. By June this year, it was back to its pre-pandemic highs. 

But it has not gone anywhere since. It has slumped and recovered, but is still trading lower than its June 2021 levels. My BT investment is running into losses right now. Since I have been holding the stock for almost two years now, during which I have earned no dividends, it is a good time for me to assess if I should continue to hang on to this investment. 

Dividends come back for the FTSE 100 stock

First, let me consider dividends. It is true that BT has not paid any dividends  for some time, but it is going to start paying them soon. Its interim dividend payout is scheduled for February 2022, for the financial year 2021-22. I am guessing that the final one for the year should be paid by next September, which is normally its schedule. It plans to pay 7.7p for the year, which brings its forward dividend yield to 4.4%. 

To be fair, this is not bad at all. It is higher than the average FTSE 100 yield of 3.5%. And it even just beats inflation, which is forecast to be at 4% in 2022. In the past year, the stock has also risen some 30%, so there is also hope of capital gains. 

What I’d do now

Based on this, I think that I should wait a while before selling my BT stock. The company has strong credentials, and now when online spending has become so much more ubiquitous, its services’ significance have only grown. It is facing rising competition, but I would like to wait and watch how that plays out. As such, I would hold the stock right now, but not buy more of it. 

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Manika Premsingh owns BT GROUP PLC ORD 5P. 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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