Do BT shares offer greater investment appeal than Vodafone shares?

Will BT Group plc’s (LON:BT.A) (BT.A.L) share price beat that of Vodafone Group plc (LON:VOD) (VOD.L)?


BT Group plc’s (LON:BT.A) (BT.A.L) share price has dropped 13% so far in 2017. At the same time, Vodafone Group plc’s (LON:VOD) (VOD.L) share price is 5% higher than it was at the start of the year.

In BT’s case, its share price has been negatively affected by the profit warning it released a number of weeks ago. Due to challenges in its Italian division, the company’s profitability over the next couple of years is expected to be lower than previous guidance had stated. This knocked investor confidence in BT and meant it arguably deserved a lower valuation than previously.

However, BT’s shares were given a boost by the deal regarding Openreach. This will see Openreach become a distinct business entity and this seems to have aided investor sentiment in the stock.

At the same time, Vodafone has enjoyed a much more stable performance in my opinion. I think its outlook is more robust than that of BT, as it is not making the same amount of changes to its business at the moment. In my view, this means less risk.

For example, Vodafone has already made multiple acquisitions in recent years and they have been successfully integrated. BT is still in the process of integrating EE, which is a major task given the fact it is the largest mobile operator in the UK. However, I think it will work out well and provide BT with a dominant position within the quad play market. As well as its investment in sports rights, I think this will improve the company’s share price performance.

Vodafone’s dividend yield of 5.4% is higher than BT’s dividend yield of 4.3%. From an income perspective, I think Vodafone not only offers a better yield, but also more stable dividend payments due to its less risky business model. Further, Vodafone is forecast to grow EPS at a double-digit rate in each of the next 2 financial years. BT’s outlook is far less certain after its profit warning.

Therefore, while I feel BT has investment appeal in the long run, I would rather own Vodafone shares at the moment.

About Robert Stephens 3630 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email or use one of the other contact methods available on the 'Contact Us' page