Member Info for EMMJANE

Lol, fleccy, having a fleeting look at 110p now, see if it can move up from here.

Money markets are not cheap if your credit rating is downgraded. Hence the current debt is pretty high and bt credit rating currently is ok to borrow at decent rates. But if they load on too much more debt the credit rating will deteriorate and most profits would go on int payments. The dividend cut is prudent for the long term in my opinion. If execution goes well with the reinvestment then you can create your own dividend by selling the shares at a higher price.
I personally would rather sp be 300p in 5 years with no dividends paid, than it be 150p with 10p a year dividend paid for 5 years.
Bt believe they will get 10/12 per cent pa return on new investment, which is much higher return than paying the dividend, so it is actually looking after the shareholder, in total returns from here, with its new strategy. If executed well.

The current sp valuation, also gives a lot of room if execution isnt great when you consider sandp before cv19 was trdg avge 30 times earnings, even now trades 21 times earnings. Ftse is generally cheap at avge 12 times earnings and bt is 6. Us mkt priced so high due to weighting of tech stocks in it and mkt perception of growth. I see bt having growth ie cyber security division and should have some correlation with tech stocks and should get growth from its investments that they reckon get 10/12 per cent p.a return.

As said yesterday though, i would like to see some director share purchases this week. Doesnt janson still own 500k of worldpay at nearly usd100 a share (usd50m) and only own gbp2m worth of bt. Would be good to see him buy more bt down here if he believes in his strategy?

When we get through 1.0950 resistance and the income investment funds have finished selling as bt not in their income mandate, can see this going to 120 quickly for building further gains. imho At this price it is too cheap, even with pricing in the risk of bad execution on the 5 year plan.

Now results out way and out of closed period for them purchasing by shares, I suspect a possible few director buys this week. In fact I’d be a little concerned if none do, with price here and open period. Watch this space in that for confirmation of board value in sp.

We may or should start to get broker recommendations from the announcement of the new 5 year strategy, which should be interesting too as if more bullish on strategy price could increase quickly from these levels, which the investment is designed for a 10/12 per cent return. This growth investment is to either new custys or higher spend per custy or combination of both and by definition the plan is for some growth, otherwise no point in investing those big sums, if there’s no return on investment.

Will be interesting to see the new analysts view on the strategy/investments. I’m positive in the strategy, especially at current valuation, but I’m looking for these sort of catalysts over the coming week or two, for a view of possible short term moves coming.

Interesting observation. Last week nearly every trading day before the results, the price dropped at auction after the 4.30pm close. Today it rose. Which suggest that the speculative no dividend speculative funds that were selling last week, are taking them back now.

Not necessary the catalyst of us bottoming, but price action looks to me though it is going to slowly turn upwards from here.

Hi bkkk

Tbh my very short term trading record isn’t great. Ie I bought at 118 last week as first investment but now 105. But I do feel quiet strong after digesting all the news and where the sp is currently sitting, in a 1mth recovery to 130p/140p at least. From then on i feel it may need the updates to be in line with the 5 year recovery plan, but I do feel confident in sp being 300p in 5 years, with a minimum 12p pa dividend then. If brexit deal works out too I see uk domestic stocks also getting back to avge higher pe levels too and back to 16 times avge, which will also add a little extra valuation in long term ie too 400 in 5/7 years.

But I do feel looking at the potential need and speeding up of investment due to the amount of extra data /security uk households will need, bt will do very well now they are not shackled by the dividend for the next couple of years And then a lower commitment thereafter. The company will in my opinion, now thrive in a growing mkt area and then eventually return to high dividends when investment over and their lot higher profits from the investments in meantime.

With ofcom seemingly going to be more bt friendly and tax breaks on broadband infrastructure in the offing, it’s the right time for bt to grow and reward shareholders properly with a higher sp. instead of high dividends and a falling sp, due to worries about bt long term and all the other commitments they had. It clearly is beneficial for shareholders to stop dividend and use money to spend on infrastructure if you are getting10/12 per cent return on that investment as board has stated.

https://www.globalservices.bt.com/en/solutions/products/cyber-security-platform

I was also reading that bt cyber security is one of the best out their for business. With a lot more working from home in future, businesses will be very keen to spend on this in future as businesses wants their employees home workplace secure from hackers of each companies databases it holds.

Obviously not the only reason to buy bt, but it will be a lucrative growing area, at the expense of commercial property shrinkage.

Board not but

But expects 10/12 per cent pa return on the investment. If case in five years if board target met means gbp3bln pa profit, with investment slowing massively after, which debt can then reduce even after interest, dividend payments, while assets are high in value.

If they do generate their target in 5 years and sp is gbp3 then that’s still only 10 times p.e well below historic avge. I see some big move higher next week as investors digest the plan this weekend.

Great article in guardian

https://www.google.co.uk/amp/s/amp.theguardian.com/business/nils-pratley-on-finance/2020/may/07/bt-shocks-shareholders-but-fibre-investment-is-long-overdue

I will also add investment to my current holding that I bought at 118.
I’ve left a trailing stop/ loss entry at 110 for a extra investment into bt.

If price reduces to 95 or below I’ll lower entry stop / loss to 105.

Fleccy

Your tech / infrastructure knowledge gives me confidence in bt for long term. Thanks for all that info. There’s a few other posters that also give great insight to bt.

Toff at same time has been very good at understanding the mkt in knowing the mkt was driving the board to this necessary strategy for its long term growth. Which mainly is the dividend needed to go, as the cash was more immediately needed and bt retaining a good credit rating was absolutely crucial, otherwise by could quickly be downgraded and interest debt would swarm its profits. But now it can be seen as a growth stock.

I’d rather the sp be 300 in 5 years with very little dividends than 110 with 5 years of 10p dividend per annum.

So many stocks that dont pay dividends and invest in growth, seem to get rewarded the most i.e tesla, amazon etc. Hopefully bt new strategy will be seen as a growth investment, whilst becoming a leaner machine, through tech innovation.

I think the 5 year plan will be a good thing, we probably started clearing out income investors today and next week. But see then some decent growth in the sp. End of day its a gbp2bln profit business, which chance to grow that with the dividend reinvestments and further efficiency savings, which at current price dividend or no dividend we are below 7 times earnings, which is a bargain. It will take a little time though for sp to turn around but i think we are or close to bottom over next month price action.

When it comes to the june pension revaluation. There will be a positive in the revaluation of avge life expectancy, which has started to go down in the past few years, even before cv19. As sad as it is life expectancy will be even less with cv 19, which has a major factor on the actuary calculations of pension deficits.

quote from some broker

Russ Mould, investment director at AJ Bell, said: "One might be shocked that dividends are off the menu for at least the next 18 months rather than a short-term suspension. However now is the perfect time for BT to bury all thoughts of a dividend in favour of making its business more competitive.

"Years of paying dividends have made BT a popular stock among investors, particularly those in retirement who rely on their pensions to generate an income. The dividend cut will therefore be a blow to a lot of people's finances.

"However, its investors shouldn't have really been expecting a dividend at the moment, given so many other large companies are pausing the shareholder payment and the fact that BT has high debt levels and large capital expenditure requirements."

Mould said BT has "much more pressing needs" for its cash, so investors should support its decision to accelerate the roll-out of its fibre-to-the-premises network. "Giving up dividends now could be a small sacrifice if it enables the business become stronger for longer."

Quinny im a long term investor here, but there is lots of short term fragility that could still send this either way from here in short term. But im rubbish short term trader tbh.

Toff - indeed good call on dividend being zero. I thought would be cut but not zero. Also good call on the dip to buy after the results which is now.

I still however like this as long term value at 118p and i do think not paying the dividend does indeed keep the investment case for long term holders, as the business is not as tied up in investing and /or reducing debt.

However, we still need to get through this current economic global crisis first, as if millions loose jobs for long term, a lot more reserves will be needed for not paying bills etc and also the highlighted risks laid out in 2020/21 fwd guidance will come to bear. So theres still quite lot of uncertainty to pass, before the sp probably can get traction to regain back above 130p again.

103 open

For 2 years till 21/22 for reinvestment