Why I’d buy BT shares today

After a solid performance in the first half of 2022, this Fool explains why he’d add BT shares to his portfolio today.

| More on:
Young brown woman delighted with what she sees on her screen

Image source: Getty Images

The first half of 2022 has proved to be a damning time for the stock market. Factors such as rising inflation have dampened investor confidence. And as a result, many stocks have felt the full effect of this. Yet amongst this, BT (LSE: BT.A) shares have posted a solid performance, rising over 8% this year.

The past five years have been somewhat of a disappointing time for BT shareholders. The stock is down 36% during this period as it has faced multiple challenges such as the Covid-19 pandemic. But, with the stock gaining some momentum this year, I believe this could be the start of positive times ahead for BT. Let’s find out why.

A solid buy

My main attraction to BT shares is the fact it’s a ‘defensive’ stock. With a huge amount of pre-existing infrastructure, the business has minimal operating cost exposure. And on top of this, it also has a large customer base, giving it — to some degree — more pricing power.

Its defensive nature essentially means in uncertain periods like the one we are currently facing, BT offers my portfolio stability. With inflation continuing to soar, reaching over 9% in the UK for May, for me this is pivotal. Its strong dividend yield of 4.1% could also boost my portfolio with extra cash and offer me some protection against rising inflation.

I also like the positive outlook the business provided in its full-year results released in March. Its Opeanreach network has continued to grow and has now reached over 7 million premises with 1.8 million connections. And its 5G network now covers half of the UK population.

BT also announced how it’s extending its cost savings target to £2.5bn by the end of FY25, from the original £2bn target for FY24. This shows the business is moving in the right direction.

As a potential investor, these are positive signs.

BT doubts

While I remain bullish on BT, I do see some issues. My main concern is the debt it has. According to its results, this currently sits at just over £18bn. With interest rates creeping up, this will place further pressure on the business in its attempts to eradicate this debt. For me, this is a deterring factor.

The firm is also involved in a dispute with the Communication Workers Union (CWU) regarding pay. The CWU represents around 40% of BT’s workforce. And with the cost-of-living crisis, the union has been pressing the firm for wage increases. After failing to agree on a rise, members have been voting this month on whether industrial action will take place. Should this occur, this would undoubtedly hurt the BT share price.

Why I’d buy

There’s no doubt that, should BT fail to come to an agreement with the CWU, the next few months could see the stock struggle.

However, as a long-term investor, I see BT shares as a solid buy. The stability it can bring to my portfolio is something I value highly. And its full-year results provide me with optimism for the future of the business.

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 considered so you should consider taking independent financial advice.

Charlie Keough 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.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

GSK shares plummet 15% in a week! What’s going on here?

GSK shares had a bad time last week. They're down 15% as investors' sentiment soured ahead of litigation proceedings in…

Read more »

Burst your bubble thumbtack and balloon background
Investing Articles

Stock market recovery: have all the bubbles now burst?

Asset bubbles keep on coming, and here's what I'm doing to navigate through them and invest for the stock market…

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

How I’d invest £290 a month in UK shares for a passive income that beats the State Pension

UK shares can offer a lucrative path for passive income. Our writer considers a plan to double his State Pension.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

3 of the best shares to buy now with £2,000

I reckon the best shares to buy now have strong growth in earnings and recent good news flow, such as…

Read more »

Young female analyst working at her desk in the office
Investing Articles

How I’m aiming for £500 a month in income from dividend stocks 

Here's my three-step plan for achieving a growing income from dividend stocks and three companies I'd use to help execute…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

UK shares are cheap! So why is Warren Buffett ignoring them and should you too?

Many British shares are trading cheaply and pay dividends. This is normally the hunting ground for Warren Buffett, yet he's…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How I’ve increased my passive income by 600%

Finding the right opportunities can bring spectacular results. Here’s how our author has managed to increase his monthly passive income…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Could lithium shares make my Stocks and Shares ISA a goldmine?

Our writer is considering buying lithium shares for his Stocks and Shares ISA. Here, he outlines the decision process he…

Read more »