Today I am looking at why I believe BT Group (LSE: BT-A) (NYSE: BT.US) is a great addition to any stocks portfolio.
Broadband demand continues surging
BT is by far Britain’s leader in the broadband market, as its vast, multi-year capital expenditure programme to lay fibre across the nation is paying off handsomely. The company announced in last month’s interims that more than 18 million households and businesses are connected to the network — up from 17 million as of the end of October — and new sign-ups to Openreach are expected to keep surging as the firm’s investment plan chugs along.
Indeed, BT’s business-bolstering measures in the broadband space helped to push new broadband clients 23% higher in October-December, to 150,000, representing 60% market share. This helped to drive revenues at the firm’s BT Retail division 4% higher, to £1.88bn, during the period.
Television operations pulling up trees
Much of the firm’s success in the broadband space can be attributed to its successful television arm, and more specifically the aggressive roll-out of its BT Sport channels. The plan to give away free subscription to its internet clients has proved a masterstroke, and the subscriber base to these channels now stands at more than 2.5 million.
Success here created 53,000 new television clients during the last quarter — more than double that of the corresponding 2012 period — a result that helped push turnover at the BT Consumer 6% higher to more than £1bn. This represents the best performance for a decade.
A lucrative pick for income investors
At first glance BT does not appear to be a particularly generous dividend generator. Although the business has steadily built the annual dividend over many years, the yield still trails that of its rivals — BT currently carries a readout of 2.8% for the 12 months ending March 2014, below a forward average of 3.1% for the complete FTSE 100.
However, City analysts expect the payout to accelerate in coming years in line with strong earnings growth. The firm is expected to raise the 2015 dividend 12.4% to 14.2p per share, with an additional 17.7% advance pencilled in for the following year to 14.6p. These anticipated payments carry rapidly-improving yields of 3.2% and 3.7%.
On top of this, BT is also returning vast sums to its shareholders in the form of its share buyback scheme, and the company aims to repurchase £300m worth of shares both this year and next.