Down 31% in a year, the BT share price is due a rebound

The BT share price has dived almost a third in 12 months. It’s also lost more than half of its value over five years. Today, the shares look so cheap to me.

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Image source: BT Group plc

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The past 12 months have seen global stock markets surge worldwide. For example, the US S&P 500 index has leapt 25.7% in the past year, while its tech-heavy cousin, the Nasdaq Composite, has jumped 35.9% over this period. Meanwhile, the UK’s elite FTSE 100 index is up a mere 2.2%, but that’s way better than the battered BT Group (LSE: BT) share price.

BT takes a beating

I’ve had my eye on BT shares for perhaps the last two years, but have yet to press the ‘Buy’ button at my broker. From BT’s chart, it seems the share price has been in a lengthy decline since the peaks of late 2015.

As I write, the shares trade at 107.15p, valuing the UK’s former telecoms monopoly at £10.7bn. This is a tiny fraction of the group’s market valuation during the dotcom boom, when its shares closed at 1,053.25p on 30 December 1999.

For at least two decades and more, BT has been a steady destroyer of shareholder capital. Here’s how the shares have performed over six timescales:

Five days+2.3%
One month-1.7%
Six months-9.7%
YTD 2024-13.3%
One year-30.8%
Five years-52.4%

Apart from a brief pop over the past week, BT shares have declined in value over five periods ranging from one month to five years. They’ve crashed by close to a third over 12 months and have more than halved in the past half-decade.

This kind of relentlessly negative momentum must be very frustrating for long-term BT investors. But maybe, just maybe, this tanker might be set to turn around?

BT looks too cheap to me

Currently, the BT share price hovers just 6.1% above its 53-week low of 101p, hit on 12 February 2024. This is a long way short of its 52-week high of 165.49p, briefly reached on 23 June 2023.

One consolation for BT’s owners is that the above figures exclude cash dividends, which are very generous from this and many other Footsie firms. And as BT’s shares fall, this boosts their cash yield.

At the current BT share price, this widely held stock trades on a modest multiple of 5.8 times earnings. This translates into a hefty earnings yield of 17.2% — over double that of the wider FTSE 100.

Furthermore, BT’s market-beating dividend yield of 7.2% a year is covered almost 2.4 times by trailing earnings. To me, this seems like a solid margin of safety for future payouts (which are never guaranteed, of course).

Should I buy?

I watched and waited for the BT share price to fall below £1, aiming to snap up some stock on the cheap. However, this has yet to happen, plus I don’t have sufficient cash at hand to make a meaningful purchase.

Then again, one thing worries me about this British business: its massive debt pile. At end-September 2023, this stood at £19.7bn, up 4.2% from £18.9bn six months earlier. And with UK interest rates at 17-year highs, this burden will weigh on the firm’s results for years to come.

Summing up, you can’t spell doubtful without BT. Even so, I might be pushed into a bargain buy some time soon!

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.

Cliff D'Arcy 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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