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BT Group (LON:BT.A) Is Increasing Its Dividend To £0.0576

Simply Wall St · 05/25 08:04

BT Group plc (LON:BT.A) will increase its dividend on the 10th of September to £0.0576, which is 1.2% higher than last year's payment from the same period of £0.0569. Based on this payment, the dividend yield for the company will be 4.7%, which is fairly typical for the industry.

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BT Group's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment made up 76% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 69.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 42% which would be quite comfortable going to take the dividend forward.

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LSE:BT.A Historic Dividend May 25th 2025

View our latest analysis for BT Group

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was £0.124, compared to the most recent full-year payment of £0.0816. Doing the maths, this is a decline of about 4.1% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that BT Group's earnings per share has fallen at approximately 9.3% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think BT Group's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for BT Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.