The BT (LSE: BT.A) share price has slipped around 5% over the past month after analysts at New Street Research cut their rating from Buy to Neutral, joining a wave of recent downgrades. This followed Citigroup’s Sell call in early September and a recent Underperform rating from BNP Paribas Exane.
The cautious mood begs the question: with a 4.5% yield on offer, is BT still worth a look?
The 5G game plan
BT’s ambitious network plans grabbed headlines at the recent Connected Britain 2025 event. The company, through its EE brand, announced that it aims to deliver standalone 5G (branded as 5G+) to 99% of the UK population by 2030.
That’s around four years ahead of rivals, and very much in line with the government’s connectivity targets. But the group hasn’t been shy about flagging concerns over planning barriers, spectrum licences, and government fees that it says could delay a potential £230bn boost to the economy.
This big vision doesn’t come cheap. BT has been pouring resources into full-fibre rollout, which now reaches over 18m premises, while simultaneously managing its 5G expansion. Funding all of this has sent total debt to roughly £23bn, prompting investors to ask whether the benefits of such investment are already priced in.
For a stock now trading near 185p, the recent analyst moves suggest that optimism’s fading.
Dividends: steady or stretched?
For many investors, BT has long been a dividend stalwart. The company paid a modestly increased dividend this year (up 2% to 8.16p a share) for the year to 31 March. Now at 4.5%, the yield certainly appeals to those seeking income.
Yet history shows that BT’s payouts haven’t always been dependable; cuts in past years dented its income credibility. With the firm funnelling cash into nationwide infrastructure alongside its promise of £900m in annualised cost savings, the risk is whether that dividend remains sustainable if conditions worsen.
The financial picture
BT’s performance in FY25 paints a mixed picture. The telecoms giant reported roughly £20bn in revenue, with only £1bn in earnings — translating to a slender 5% net margin. Debt remains hefty at around £23.3bn, while free cash flow sits close to £1.2bn.
That still covers its dividend obligations, which consume about three-quarters of earnings, but it leaves limited room for error. Analysts at New Street Research see the tightened broadband market as an emerging threat, with fixed-line demand declining due to alternatives like Fixed Wireless Access (FWA) and mobile tethering.
If this trend accelerates, BT’s high-spend 5G and fibre rollout may struggle to generate proportional returns.
Too risky for my taste
With a price-to-earnings (P/E) ratio near 20, BT’s shares hardly scream bargain. Combine that with a heavy debt burden, narrowing broadband demand and reminders of its dividend volatility – yup, it’s easy to understand my wariness.
While BT’s 5G ambitions are commendable, I think the stock already reflects much of that optimism. Until the company shows progress in trimming debt and generating stronger free cash flow, it’s hard to get too excited.
For me, it’s certainly one to watch — but I won’t consider it for my portfolio just yet.
