Which will be worth more by 2030: BP or BT shares?

These two FTSE 100 stocks face potential pitfalls between now and the end of the decade. So would I go for BP shares or BT shares?

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BT Group (LSE: BT.A) shares have fallen 50% in the past five years, but are they in for a better spell?

BP (LSE: BP.) shares have done better with just a 6% fall. But aren’t the days of oil and gas shares coming to an end?

If I invest the same amount of cash in both stocks today, which will be worth more in 2030?

Very cheap

Both these stocks are on very low valuations. And both offer good dividend yields.

BT shares are on a forecast price-to-earnings (P/E) ratio of only 7.5. And that’s about half the long-term FTSE 100 average. And BP shares, even after a better five-year performance, are valued even more lowly. We’re looking at a P/E multiple of only 6.8 here.

But what about dividend yields? Analysts think the oil giant should deliver 4.2% this year. And they put the telecom stock on an even bigger 6.8% yield.

Why the gloom?

By March, BT’s net debt stood at a lofty £18.9bn. That’s way more than the £11.5bn market-cap of the company, and it throws off the P/E.

If I adjust to cover the debt, it would push the equivalent P/E up to about 20. And it doesn’t look like such a steal now, right?

But BT has been managing its debt for many years. And with a brief pandemic interruption, it’s still been churning out the dividends. Saying that, shareholders are only pocketing half the cash they got in 2019.

That conflict, between managing debt, paying dividends, and investing to expand its network, is surely behind the share price weakness of the past few years.

The future of oil?

BP shares have done better than BT in five years. But profits had a nice boost from soaring energy prices over the past couple of years.

The oil price is still up around $90 though. And while that’s way back from its peaks, it’s still a nicely profitable level. If it keeps up, I think BP dividends could be safe for some time yet.

Oil is very much out of favour these days. It’s almost impossible to go a week without hearing of anti-oil protestors disrupting something or other.

But the truth is, the world has nowhere near the capacity in renewables to replace hydrocarbon energy yet. And I can’t see that day arriving any time soon, certainly not by 2030.

Best investment?

So what do the experts say? They seem to think earnings at BP will fall in the next couple of years, though not by much. With cooling energy prices, I think that’s probably accurate.

At BT, there’s earnings growth on the cards through to 2026, but it’s modest.

If I had to choose, I think I’d give the nod to BT shares to grow my money more by 2030. And that’s mainly down to the expected long-term growth in telecoms and broadcast content.

But it’s only if I was forced to pick one. In reality, I see better buys than either BP or BT shares out there.

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.

Alan Oscroft 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.

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