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FTSE 100 dividend giant BT’s share price keeps falling. Time to buy?

The BT (LSE: BT.A) share price fall of 23% in the last year has shown little sign of slowing down. Certainly, there have been brief periods of gains, but the overall trajectory has been downward as investor sentiment has deteriorated.

However, could it now offer turnaround potential? Or are investors better off focusing on other options, such as this dividend growth stock which released positive news on Tuesday?

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Weak performance

Compared to the FTSE 100, BT’s performance has been hugely disappointing in the last year. It has underperformed the wider index by 26% during that time period. And with the FTSE 100 experiencing a volatile year, which has seen investor sentiment come under pressure at times, this highlights just how poor the company’s performance has been.

Looking ahead, the catalysts for BT’s disappointing performance look set to remain in play. The uncertainty that has surrounded the business in recent years concerning areas such as restructuring, Openreach, pension liabilities and the investment it’s making in sports rights, could still cause disruption regarding its operational and financial performance.

In turn, they may prevent the stock from delivering high earnings growth at a time when the wider telecoms sector is enjoying a relatively strong performance. For example, net profit growth of 2% this year and 1% next year seems unlikely to significantly shift investor sentiment. As such, further underperformance of the wider index could be ahead.

Value proposition

Of course, BT seems to be a very cheap stock at present. It has a price-to-earnings (P/E) ratio of around 9.5, as well as a dividend yield of 6.4%. These figures suggest there could be a wide margin of safety on offer for new investors, but may also indicate a value trap. Poor earnings growth forecasts may mean that it’s fairly valued and with pension costs and the investment it’s making in pay-tv acting as a drain on its financial resources, dividend growth could be somewhat lacking.

As a result, the prospects for BT seem to be challenging. While it could deliver a sustained recovery in future, the chances of it doing so in the next couple of years seem limited. Due to this, there may be better income and growth options available elsewhere. One example is Costain (LSE: COST), which reported positive news on Tuesday.

Improving performance

Costain’s trading thus far in the current financial year has been in line with expectations, with the smart infrastructure solutions company remaining confident about its outlook. And with it also announcing a contract win to supply Motorway Incident Detection and Automated Signalling technology systems on Tuesday, it seems to offer an improving performance.

Looking ahead, the company is forecast to post a rise in its bottom line of 6% per annum over the next two years. This is expected to prompt dividend growth of 10.5% per year in the same time period, which puts the stock on a forward dividend yield of around 3.7%.

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Peter Stephens 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.