The BT share price is up 50%+ in a year and its dividends are back. What’s next?

The BT share price has done well over the past year and continues to perform in 2022. But can it go higher or is it time for me to take profits?

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I bought BT (LSE: BT.A) shares a while ago. Holding on to them has been an exercise in patience. Finally however, the FTSE 100 stock is beginning to pay off. Its share price has risen more than 50% in the the past year and it has restarted its dividends too. This is all very well, provided that my gains from the stock continue to accrue. Otherwise, am I better off selling it off while it is still ahead? 

BT share price flip-flops

The answer to the question is not as straightforward as it might appear on the surface. And by that I mean, that I cannot take the stock’s rise for granted. It is true that the BT stock price is now back to its pre-pandemic levels. But here is the catch. This is not the first time it has achieved that level. It was there in the middle of last year. And in any case, the long-term share price chart still looks disappointing. Over the past five years it has fallen some 40%. 

Unconvincing valuation

Moreover, even a basic metric like its price-to-earnings (P/E) ratio does not look terribly encouraging. It has a P/E of 19 times, which is higher than the FTSE 100 ratio of 16 times. Now, it is not a given that a stock with a higher-than-average earnings ratio will necessarily see little or no increase in its share price. There are plenty of high-performing stocks whose P/Es are routinely higher than average, but then they have the results to back that. 

And that is not true for BT, I am afraid. The company’s revenues and earnings have both declined over the past couple of years. Even though its dividends are back, they are far from where they were pre-pandemic. Its current dividend yield is a small 1.2%. This compares unfavourably to the FTSE 100 average of 3.4% at present. But it also compares unfavourably against its own yield over the past five years of 4.9%. 

Its latest trading update was not particularly encouraging either. The company expects its revenue to decline in the current financial year because of a delayed recovery. While its expectations for all other metrics are unchanged, I am less certain of how they will turn out now and what will happen to the share price. 

Is this FTSE 100 stock a buy for me?

All is far from lost for BT. The company is a big player in telecoms and broadband provision. Openreach, its fibre optic cables division that rakes in some serious profits for the company, is doing particularly well. In a fast growing post-Brexit UK economy, I think the BT share price has the potential to do well. But I am not convinced I want to buy it yet. I am not selling my existing stock but given the choice, I will not be buying more of it. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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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