The trajectory of BT (LSE: BT-A) shares will no doubt have been leaving investors feeling gloomy in recent times.
The telecommunications giant is a FTSE 100 stalwart. And while it’s failed to excite for a while, I think its current price could be appealing. Here’s why.
BT share price history
Let’s start by assessing the performance of the stock.
Looking at the BT share price across the last five years isn’t pretty reading. Since then, its share price is down over 50%. The stock flirted with the 300p mark back then. Today, a share costs just 140p.
The last year has told a similar tale. In this time, it’s down 9%. And these losses have only continued in 2022.
The main reason for this is inflation. Rates going higher have seen investor confidence in the market go lower. While BT isn’t alone in its struggles as this year has seen a monumental amount wiped off global markets, it’s still not good news for shareholders.
On top of this, the business has also been in the news following staff strikes. The firm had been embroiled in discussions with the Communication Workers Union regarding calls for a pay rise amid the cost-of-living crisis. But BT’s offers haven’t satisfied the union.
Not all down and out
It’s clear to see BT has faced headwinds. However, I see potential with the stock.
Firstly, its dividend yield will most certainly come in handy during these times. For the year ended March 2022, its payout totalled 7.7p per share. At current levels, that equates to a 5.5% yield. And while it’s not inflation-beating, it offers me a greater hedge against inflation than the FTSE 100 average.
Another enticing factor is a potential takeover by French billionaire Patrick Drahi. He currently owns an 18% stake in the firm. And with the UK government providing Drahi an unexpected all-clear regarding his stake, this could open the door for a takeover attempt in the months ahead. This would provide the BT share price with a boost.
Of course, I don’t buy solely based on speculative factors such as a takeover that may or may not happen. You see, I also think there’s long-term value in the stock.
What I like about BT is the large infrastructure it already has in place. This provides it with some higher degree of pricing power. This was seen with raised prices for broadband and mobile contracts boosting its sales in the last quarter. With the continuous expansion of its Openreach network, which now reaches 8m homes and businesses across the UK, I think BT has solid foundations to excel.
My biggest concern is its debt. As of 30 June, its net debt stood at £18.9bn, which is a monumental sum. With interest rates rising, and with further hikes expected, this will make the debt harder to eradicate.
Is now the time?
So, is now a good time to load up on some shares?
I’d say yes. It’s been a tough year for BT. And I’d expect it to face further headwinds. While I have no spare cash right now, if I did I’d open a small position in the stock today. Its large infrastructure provides it with an edge. And its dividend yield and a potential takeover are also a draw.
