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Are the BT and GlaxoSmithKline share prices the best FTSE 100 dividend choices?

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You could be forgiven for thinking that the garden over at BT Group (LSE: BT-A) is starting to bloom once again. Its share price has grown 23% over the past six months but this isn’t in response to a broad upswing in risk appetite (the broader FTSE 100 is down 12% over the same period).

Investors are getting giddy over BT chief executive Gavin Patterson’s upcoming departure which was announced in early June. Shareholders had been wringing their hands in frustration that, despite the implementation of massive restructuring, profits at the telecoms titan remain disappointing. They will now hang their hopes on former Worldpay head honcho Philip Jansen who will take the reins from February 1.

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It’s surprised me, though, that the share price of fellow dividend favourite GlaxoSmithKline (LSE: GSK) has failed to flower in the last six months. I thought the backcloth of rising macroeconomic and geopolitical tension would have stoked demand for the defence pharmaceuticals makers, but Glaxo has actually seen its market value shrink 3% in the period.

Too much risk

BT may have all the momentum right now, but it’s not the income share that I’d be buying for 2019. The company’s problems go far and deep and it’s debatable whether installing a new driver behind the steering wheel will make that much difference in the near term, or beyond.

The Footsie firm saw revenues drop 2% in the six months to September, according to its latest trading statement in November, and it has a mountain to climb to get the top line moving in the right direction again, as competition increases and the broader economy struggles. Given the share price rally of recent months, I fear BT may find itself backsliding again, a very real scenario in the second quarter should Jansen do what many are tipping and cut the full-year dividend.

An unchanged 15.4p per share dividend is still being viewed by the City for the year to March 2019, but this and its consequent 6.1% yield should be ignored, in my opinion. A backdrop of heavy costs and lagging revenues is expected to push earnings lower again this year, on this occasion by 6%, and probably thereafter too.

When you throw BT’s huge debts into the mix too, I think the firm’s reputation as a dividend aristocrat could be about to fall, and fall hard.

A better dividend bet

I believe that GlaxoSmithKline will prove to be a much better pick for income chasers for 2019 and thereafter.

Look, the share price disappointment of the second half that I mentioned earlier may have been disappointing, but newsflow during the six months was promising. Around the time that BT was advising of another sales slip, Glaxo was revising up its full-year profits outlook for 2018 to “the upper end of previous expectations,” reflecting the searing sales growth of its newly-launched products (like Shingrix whose sales are expected to total £700m-£750m in 2018).

Earnings at the medical giant are predicted to rise 2% in 2018, and I’m tipping the profits column to pick up momentum as its product pipeline clicks through the gears. This bodes well for dividend growth too, but for the moment investors can likely enjoy another 80p per share reward, according to City analysts, a figure that yields 5.4%.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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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