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BT is a FTSE 100 dividend stock I’d buy for my Stocks and Shares ISA today

With the Stocks and Shares ISA deadline looming, there appears to be a number of FTSE 100 income shares that could be worth a closer look. One of those is BT (LSE: BT.A). The telecoms giant has a yield of 6.8%, which is 250 basis points higher than the income return from the wider FTSE 100.

Of course, the company faces an uncertain outlook. However, with what seems to be a low valuation, it may offer high total returns over the long run alongside another dividend share that released results on Tuesday.

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Improving performance

That company in question is international energy services business Wood Group (LSE: WG). Its full-year results showed a rise in proforma revenue of 11.7% to $9,882m, while adjusted EBITA (earnings before interest, tax and amortisation) increased 5.4% to $598m. During the year it was able to integrate Amec Foster Wheeler at a relatively fast pace while also increasing cost synergy targets by 24%.

The company was able to unlock new opportunities across its broader range of capabilities and sectors in order to secure revenue synergies of over $600m. Improved operational cash flow has helped to reduce net debt by $450m since the completion of the Amec Foster Wheeler acquisition.

Looking ahead, Wood Group is expected to post a rise in earnings of 23% in the current year. This puts it on a relatively appealing price-to-earnings growth (PEG) ratio of just 0.7. With a dividend yield of 5.1%, covered twice by profit, it could offer impressive total returns over the coming years. As such, now could be the right time to buy.

High income return

As mentioned, BT offers a high yield at the present time. One reason for this is its continued share price decline. That’s essentially been caused by poor a financial performance. This means the stock now offers a high yield, albeit one that may not benefit from a rising dividend over the short run as a result of its lack of net profit growth potential.

For example, in the current year, the company’s dividend per share is expected to be the same as it was last year. In the next financial year it’s forecast to move marginally lower, as net profit is forecast to drop by 7% over the next two years. Although this may reduce its income appeal, it continues to offer a significantly higher yield than most of its index peers. It could also have the potential to turn its financial performance around over the medium term.

Clearly, BT’s pension liability and overall balance sheet are a cause for concern. So too are its spending levels at a time when sports rights are attracting interest from major streaming services with deep pockets. However, with a price-to-earnings (P/E) ratio of 8, it could offer good value for money alongside its income appeal.

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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.