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Why I think the BT share price is a cheap dividend opportunity worth buying today

While the FTSE 100 may have made gains since the start of 2019, there are still a number of stocks that seem to offer wide margins of safety. Among them is BT (LSE: BT.A), with the company’s share price having underperformed the wider index since the turn of the year.

Although the company has experienced a challenging recent past, it could now offer value investing and income investing potential. Alongside another FTSE 100 stock that released an encouraging update on Friday, it could be worth buying.

Growth potential

The stock in question is online marketplace for food delivery Just Eat (LSE: JE). Its first-quarter results showed a rise in orders of 21% to 61.4m. This was driven by continued marketplace leverage and an acceleration of delivery initiatives. As a result, its revenue increased by 28% to £227.9m.

Its UK orders increased by 7.4%, with an early Easter and warmer weather causing a degree of disruption that is not expected to continue over the medium term. International orders increased by 40%, with Canada continuing to be the company’s standout performer.

Looking ahead, Just Eat is expected to post a rise in earnings of 26% in the current year. Since the stock trades on a price-to-earnings growth (PEG) ratio of 1.3, it seems to offer good value for money.

With the popularity of online takeaway ordering likely to increase as consumers become more comfortable in using new technology, the company could be well-placed to generate continued growth over the long run. As such, now could be the right time to buy it.

Changing fortunes

As mentioned, the BT share price has disappointed in recent years. In fact, it has declined by 55% since the end of 2015. This means that it now trades on a price-to-earnings (P/E) ratio of 8.7. At a time when a number of FTSE 100 shares have relatively high ratings after a decade-long bull market, the telecoms company could have value investing appeal.

Of course, its financial performance has been disappointing in the last few years. Its profitability has fallen, while a large pension liability and significant balance sheet leverage mean that its risks may be higher than for many of its FTSE 100 index peers.

However, under a new management team that has a solid track record of performance, the stock could deliver a turnaround. Its dividend is covered 1.7 times by profit, which suggests that it is highly sustainable. With a yield of 6.6%, it offers an income return which is 250 basis points higher than that of the FTSE 100.

Therefore, while growth investors may not be positive about the company, BT could offer value and income investors a long-term opportunity to generate relatively high returns. As such, now could be a good time to buy it as a potential turnaround opportunity.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat. 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.