The last time I covered BT (LSE: BT-A), the stock was performing well. However, in the past 30 days, the share price has slid over 17%. Year to date the shares have fallen almost 10% and in the past 12 months, they’ve dropped almost 11%. So, with the share price at a dip, is now the time for me to add this FTSE 100 stock to my portfolio? With inflation on the rise, I think so. Let’s take a closer look.
Poor results
The recent fall in the BT share price can be attributed to its results released at the end of last month. The group reported a marginal 1% increase in revenue, which reached £5.1bn. It also revealed that its Openreach fibre optic broadband now covered over 8m homes and its 5G network covered 55% of the UK.
So, why have the shares fallen? Well, while revenues rose, profits fell by over 10% compared to the year before. Much of this drop was fuelled by the firm’s enterprise division that has been performing poorly in the last year. CEO Philip Jansen highlighted that the division would face “ongoing challenges” throughout the remainder of 2022 and beyond.
Inflation hedge
Although the firm’s profits have fallen, I think that the stock could be a great buy at the current share price. A primary reason for this is the current state of the UK economy. Inflation is still on the rise, reaching a sizzling 12.7% for June. Economists are predicting this trend to continue towards the back end of 2022 and into 2023.
BT has a huge number of assets in the form of pre-existing infrastructure, which is great at protecting it against rising costs. In addition to this, the company is a ‘defensive stock’. Even when the economy falls into recession — something looking ever more likely — people will be watching TV and making phone calls, so it will always have customers.
It also operates with a low price-to-earnings (P/E) ratio of just 12.4. Comparing this with competitor Vodafone, which has a P/E ratio of just under 20, I see great value. The meaty 4.9% dividend that BT shares offer is also comfortably above the FTSE 100 average of 3.7. This could be great for topping up my portfolio with some extra cash. Both of these factors encourage me to buy the stock.
Why I’m buying
In my opinion, the low valuation and inflationary hedge mark an attractive opportunity to add BT shares to my portfolio. The shares have been sliding due to sub-par results. However, in my opinion, the business is still well positioned for long-term success, especially when considering its impressive 5G and Openreach expansion. Therefore, I’m looking at opening a BT position in my portfolio in the near future.
