The BT share price is crashing! Is now finally time to buy?

With the BT share price around £1, and a hefty 6.5% yield on offer, is there a bargain buy here? Tom Rodgers considers the case.

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The BT (LSE:BT.A) share price has been whacked by the market in the last five years. It’s down 52% over that time, to clear and pretty vocal investor dismay.

A recent shift in tactics could turn things around, however. It’s an intriguing move that could add a significant boost to BT’s revenue.

So my question today is this. At just over £1, is the BT share price ripe for the picking?

Because I follow Warren Buffett, I know just what he might say. “Whether we’re talking about stocks or socks, I like buying quality merchandise when it is marked down”.

Does that apply here? More to the point: is BT ‘quality merchandise’ going for a steal, or should I leave it on the shelf where it belongs?

6.5% dividend yield

A 6.5% dividend for holding BT shares seems appealing on paper. But a slumping share price means many long-term holders will be in the red. The shares peaked at £10.53 on 31 December 1999. It’s been a slow downwards bleed ever since.

The point being: cheap shares are not always bargains. Sometimes the market does price companies accurately. That should factor into all my calculations.

BT halted dividend payments in 2020 due to the uncertainty around the pandemic. They resumed in 2022 at 7.70p per share. And that’s the level they’ve been held at.

City analysts forecast BT will pay dividends of 7.79p per share and 7.86p per share in 2024 and 2025. So there is a slight uplift on the cards, even if it is modest. Of course, analysts aren’t always right.

Where’s the growth?

If I was to take a long-term position here, I’d want to see ambition from the top brass. I’d want to know there was a plan to switch the BT share price from sinking to soaring.

That may have appeared in the last week. Through its EE mobile arm, BT is making a move into selling electronics. These include smart watches, TVs, and games consoles. It seems a sensible idea to use BT’s purchasing power to grab market share from e-commerce retailers like Amazon or Argos.

There are also plans afoot to drop the BT Mobile brand, and let EE take over that division entirely. This is also a pragmatic decision.

In 2023, BT Mobile was the most complained-about mobile provider to the regulator Ofcom. Customers said they hated how difficult it was to change between providers, as well as how BT Mobile dealt with their complaints.

Instead BT will sell all of its mobile provision through the better-regarded EE brand.

EE also has one of the largest allocations of 4G and 5G mobile spectrum in the UK.

Its nearest rivals in this regard, Three and Vodafone, recently announced a merger. Virgin also merged with O2 in 2021. So while the number of challengers is shrinking, these larger conglomerates pose more of a threat.

Could BT still be a turnaround buy for me? I’m uncertain that the 6.5% dividend alone is worth my money, given the company’s patchy history. And buying an out-of-favour stock requires serious conviction. I’m not sure I’ve seen enough from BT yet to merit that.

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Tom Rodgers has positions in The Motley Fool UK has recommended and Vodafone Group Public. 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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