Telecoms group BT (BT.A) shot to the top of the FTSE 100 leader board in early trade on Thursday after nudging up full year profit guidance and, importantly, confirming plans to restart paying dividends next year.

The latter news will come as a major fillip for income investors starved of yield this year amid a sea of shareholder payouts either cut back or pulled altogether during the Covid-19 pandemic.

BT axed its own second half dividend in May, leaving investors with just the 7.7p per share payment for the first half to feed on. The full year dividend had been forecast at 15.4p for last year. This year to 31 March 2021 investors will have to go without a dividend altogether but today’s payout promise for next year to March 2022 provides something to look forward to.

INVESTORS THINK TWICE

The news saw BT shares rally around 8% early on, although the cold reality of much lower future income had already started to dawn. The wings of the stock’s rise had been clipped at 2% by 10.30am at 103.65p.

Forecasts currently anticipate BT restarting its annual payout at around 7.6p per share for next year. While that implies a rough 7.3% dividend yield after today’s share price shift, it also strikes home the scale of the value destruction blow shareholders have had to parry.  

BT stock has almost halved during 2020, while nearly 80% of the telco’s value has been wiped out since October 2015.

IMPROVED PERFORMANCE

Britain's biggest fixed-line and mobile operator said it had delivered a strong operational performance in the first half given the challenges of Covid-19 as it raised the lower limit of its earnings guidance for the year.

The company on Thursday reported an 8% drop in revenue to £10.59 billion and a 5% fall in adjusted earnings to £3.72 billion, or 8.6p per share. This was versus 10.8p earnings per share last year on £11.47 billion of revenue.

Net cash from operations jumped from £2.24 billion last year to £2.71 billion year-on-year, helping slash £720 million off net debt, now running at £17.6 billion.

BT said the performance had given it confidence to raise the lower end of its earnings outlook for the year from £7.2 billion to £7.3 billion, with the upper end staying at £7.5 billion. Earnings of at least £7.9 billion is guided for the 2022/23 fiscal year.

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Issue Date: 29 Oct 2020