Back in 2009, BT Group (LSE: BT-A) (NYSE: BT.US) was mired in its pension fund woes — slumping stock market valuations had hurt the fund’s assets, and BT was forced to inject massive amounts of cash to build up the coffers. And that year, earnings per share (EPS) crashed by a third.
But doesn’t that seem such a long time ago now?
What a recovery!
In the intervening years, BT’s earnings growth has exceeded expectations, with an EPS figure of 16p in 2009 growing to 26.6p by 2013.
For the year just ended in March 2014 analysts are expecting flat earnings, but there’s a resumption of growth on the cards for 2015 — there’s a rise of 9% penciled in for 2015, followed by a further 8% for 2016.
The dividend has been climbing, too — all the way from 6.5p per share back in 2009 to 9.5p in 2013, and the consensus suggests a 14% rise to 10.8p for the year just closed. The next two years? Further dividend rises of 15% and 17% respectively.
Despite earnings and dividends rising, yields have actually been falling, and 2014’s payout is expected to yield just 2.9%. But it’s for the best of reasons — the share price has been soaring!
The shares are flying
Over the past five years, BT shares have quadrupled in price to 380p while the FTSE has gained just 50% — although it’s sobering to remember that the price reached as high as £15 in the tech boom at the turn of the century! Over the past 12 months alone the BT price has gained 36% with the FTSE 100 lagging on just 6%, but even after that we still only have a P/E of a very average-looking 14.
Does that make the shares cheap? The City commentators seem to think so, with 12 out of 20 putting out a Strong Buy call against three Strong Sell urgings and one plain Sell.
Growing optimism
And in contrast to an increasingly bearish stance on the FTSE as a whole, the City’s opinion of BT has been steadily improving — the 29p EPS forecast for 2015 is up from an expectation of 27p a year ago, and the predicted dividend has been upped from 12.2p to 12.5p per share.