Here’s the dividend forecast for BT shares through to 2027

BT shares have surged this year but still represent an appealing opportunity for income-focused investors. Here’s the dividend forecast.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: BT Group plc

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

BT (LSE:BT.A) shares have outperformed the FTSE 100 in recent months, surging to nearly 150p per share from a little over 100p.

This has, however, meant a falling dividend yield. Investing today, I’d receive 5.5% per year, down from over 7% if I had invested in early May.

Looking forward, analysts expect dividend payments to rise, but not by much. Let’s take a closer look.

Should you invest £1,000 in Kodal Minerals Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Kodal Minerals Plc made the list?

See the 6 stocks

202520262027
Dividend payment8.17p8.34p8.25p
EPS14.1p15p14.8p
Dividend yield5.51%5.63%5.57%
EPS (Earning per share)

The above chart uses the consensus estimates of all the analysts covering the stock. As such, the downturn in expected dividends in 2027 may reflect the fact that the most bullish analysts haven’t issued a forecast for that year.

Nonetheless, the broad consensus is that dividends won’t increase rapidly over the medium term. That’s certainly something worth bearing in mind.

By comparison, investors could buy Lloyds stock today with a forward yield of 5.5%. However, forecasts suggest the yield will be 6.9% based on increased dividend payments by 2027.

A favourite among analysts

BT is actually one of the most undervalued stocks on the FTSE 100, according to the 17 analysts covering the stock. The average share price target is 197.4p, inferring that the stock is undervalued by 33.3%.

However, it’s not an easy company to value because it’s going through something of a transition. The rollout of Fibre to the Premises (FTTP) has raised costs by billions of pounds. However, the company has now passed the peak in its spending on this, so should now become much more profitable.

Exactly how profitable is debated. The highest share price target for BT is 290p, while the lowest is 110p. It’s quite unusual to see such a huge variance between the highest and lowest targets.

Created with Highcharts 11.4.3Bt Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Still worth an investing in?

I said I was going to invest in BT stock in May but before I had time to act (I went away for a week), the stock had surged 25%.

The issue I see now is the margin for safety has become a lot smaller. When I covered the stock in early May, it was trading around 80% below its share price target.

Coupled with a dividend yield of 7%, the stock seemed like a slam dunk buy for my portfolio.

However, BT is now up 45% since May. And as alluded to, the dividend yield is smaller, and the discount — albeit one generated by analysts, who can get it wrong — is a lot smaller.

So, what should I do?

Well, I’m simply keeping a close eye on the stock. Management has promised £3bn of savings every year through to the end of the decade, and I want to see whether that’s realistic.

I also want to see further evidence that debt is under control — net debt has surged to around £20bn — and that earnings are improving.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

James Fox has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

10% dividend yield! Here’s a FTSE 100 share to consider in April for passive income

This FTSE 100 stock just soared past the 10% yield mark, making it a potentially lucrative option for investors targeting…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

3 FTSE 100 safe haven stocks to consider as trade wars bite

I'm confident in the long-term outlook for the FTSE index of stocks. But these blue chips may protect investors from…

Read more »

Investing Articles

Here’s how Trump tariffs could hand us some top passive income bargains

As tariff terror grips the stock market, it's time for passive income investors to steel our nerves and look for…

Read more »

Investing Articles

These FTSE shares may offer some safety as Trump slaps tariffs on trading partners

FTSE shares moved lower on 3 April, after US President Donald Trump introduced hefty tariffs on its trading partners. These…

Read more »

Investing Articles

6.8% dividend yield! Consider these 2 ‘secret’ passive income stocks to target a £1,360 payday in 2025

Looking for ways to generate above-average dividend income? These lesser-bought income stocks are worth a close look.

Read more »

Elevated view over city of London skyline
Investing Articles

The M&G dividend yields over 10% — and could get higher!

Christopher Ruane explains why he's upbeat about the long-term outlook for the M&G dividend yield and would happily buy the…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

2 popular UK growth stocks I wouldn’t touch with a bargepole in today’s market

Buying growth stocks can deliver market-beating returns, but this FTSE 250 pair doesn't look like a convincing investment for our…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

10 FTSE shares falling today after President Trump’s tariffs bombshell!

Our writer explains why JD Sports Fashion from the FTSE 100 and a diverse bunch of other UK stocks are…

Read more »