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I am watching the telecom juggernaut closely. BT (LSE: BT-A) this month. This may be a good time to add BT shares to my portfolio as the stock has fallen sharply since the release of its Q1 results.
Falling stock price
Falling stock prices are sometimes a warning sign that can turn off investors. However, I see it as an opportunity to grab a bargain!
BT’s share price has fallen 13% in the last year, and a whopping 10% in the last month! Currently at 145.5 p.
The latest sales offset is down to announce Q1 results for FY23. Revenues were essentially flat and pre-tax profits were down 10% from last year. It’s no surprise that inflation is high in the UK.
From an overall perspective, I still think this is a solid business. It’s profitable, and impressively improved its revenue by 7% quarter-on-quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) also improved, and that’s the message management has been trying to push.
Growth potential
I think BT is good for coming out of recession and the UK’s ongoing battle with inflation.
It has a large infrastructure in the UK. With 5G on the horizon, this gives BT a significant presence in the emerging market.
BT has a strong existing customer base. It has some form of contact with 50% of UK households. This is a great springboard to drive revenue growth in the coming years.
Sharing happiness
BT currently has a dividend yield of 5.3 percent. This is between 3% and 4% better than the FTSE 100 average.
It also has a strong track record of paying out shareholders. Barring the Covid-hit 2020 and 2021, the telecom giant has consistently paid dividends to shareholders twice a year since 2002.
This is great news for my portfolio as I want to hold it for the long term.
Downsides?
BT also operates in a competitive market. Key competitor Vodafone In my opinion, it seems like a smart investment at the moment. So there is value in opportunities.
In recent weeks, members of the Communications Workers’ Union, which BT has been struggling with, have gone on strike. This of course takes up management time and will limit productivity and service delivery in the short term. But it may be a sign that salary expenses will need to increase in the coming months and this will affect profitability.
BT appears to have a strong combination of strong growth potential and potential dividend payouts. A fall in share price appears to be an opportunity to take a position in BT as it trades cheap.