Experienced investors will know that there are many kinds of shares. There are yo-yo shares, whose share price tends to oscillate between peaks and troughs. There earnings are fairly consistent, but there is little growth, and thus little reason for the share price to break out of this trading range.
There are also shares that crash. After a period of growth, the growth eventually slows, leading to a share price fall. These can be recovery opportunities, if you buy at the bottom and watch the share price recover.
Not many shares are like this
And, every now and then, there are shares which just rise, and rise, and rise. Not surprisingly, investors of any ilk want to find these type of shares. This is where fortunes can be made, but these shares tend to be few and far between.
Telecoms and broadcasting group BT (LSE: BT-A) (NYSE: BT.US) is one of those shares.
Check the share price of BT over recent years and you will see a line rising from the bottom left of your screen to the top right. The rise is clear and unbroken. Since the Great Recesssion of 2009, the share price has increased five-fold. Quite simply, BT has been one of the fastest-growing FTSE 100 shares of recent years.
This is a story of a company that has taken its low-growth past and turned it into a high-growth future. The history of BT is of a privatised utility that ran the UK’s phone network. With decreasing fixed-line usage, as more and more people make phone calls with their mobile phones, the company seemed condemned to a future of declining revenues, declining profits and a declining share price.
But BT chief executive Ian Livingston thought differently. He has reshaped the company, transforming it from a phone company to a business which provides phone, broadband, television and business services, both in the UK and abroad.
Turning its technical expertise and financial muscle into profits
BT has made use of its technological expertise to provide IT and telecoms services around the world through its Global Services division. And it is now leveraging its telecoms services by combining them with its rapidly growing broadcasting business.
Pay TV is a booming sector in the UK, and BT has been challenging BSkyB‘s dominance in this field. Both competitors are now growing subscribers, and are now hugely profitable. Plus, the fact that BT has been packaging its broadband with its TV service means that the number of broadband and TV subscribers are both rocketing.
Global Services and broadcasting are both areas where the company has leveraged its technical expertise and financial muscle to build a very profitable business.
This has led to a company which has been growing earnings per share year-on-year. What’s more, the market thinks BT will continue to grow earnings into the future, as its broadcasting and Global Services businesses reach critical mass.
This is why the share price has rocketed. Yet, even now, the company is still not expensive, being on a 2014 P/E of 15, with a dividend yield of 2.6, rising to 2.9, this is a company which can be seen as both a growth stock and a blue-chip high yielder, and is still worthwhile investing in.