Investors in BT (LSE: BT.A) will be happy with the stock’s performance this year. Despite wider struggles, as market woes continue to dent investor confidence, the BT share price has seen healthy growth of 12% in 2022.
The stock has failed to excite over the past five years as its share price has dropped over 35%. However, entering the tail end of this year and beyond, I think BT stock is a must for my portfolio. Here’s why.
The BT lowdown
The main thing going for BT in the current market conditions is its defensive status. By this, I mean during this volatile period the stock offers my portfolio some stability. The BT share price has bucked the trend of the FTSE 100 this year. And large levels of pre-existing infrastructure mean limited operating costs, plus it has a strong customer base, so the business in a strong position.
BT has also finalised a joint venture with Warner Brothers Discovery, which will see both firms’ sports divisions combined. BT believes it can build a strong subscription-based platform from this move. The deal could be worth over £500m, which would provide the business with a cash injection.
However, the JV is currently under investigation by the Competition and Markets Authority as it assesses whether the move could “result in a substantial lessening of competition.”
Fundamentally, BT also looks like an attractive proposition. It currently trades on a price-to-earnings ratio of 15.3. While this is above the benchmark of 10, this sits below that of competitor Vodafone (21). BT also has a forwards P/E of below 9.
As an additional bonus, it offers a chunky dividend yield of around 4%. With inflation not slowing down any time soon, this partially hedges me against rising rates.
Large debt
The biggest issue for me is its debt. The firm currently sits on a debt pile amounting to over £20bn, which is hard to ignore. And with interest rates looking like they could continue to rise as the Bank of England attempts to keep a lid on inflation, this could amplify the issue of eradicating this debt for BT.
Yesterday it was announced that BT staff intend to go on strike after long negotiations with the Communication Workers Union (CWU). This comes amid the cost-of-living crisis. And with the union dissatisfied with previous BT offers, it has decided to bring proceedings to a halt. In the weeks and months ahead, this could drag the BT share price down.
Why I’m still buying
The negotiations with CWU may pose a short-term threat to BT. However, as a long-term investor, I’d still buy the shares today. The stability the stock provides will be vital in the months ahead. And should the joint venture with Warner Bros be finalised, this should provide it with a revenue injection. With this, I’d buy BT shares today.