With BT Group plc (LON:BT.A) (BT.A.L) having recorded three successive years of falling EPS, it is perhaps unsurprising that the company is not expected to raise dividends per share in the current year.
In fact, the telecoms company is forecast to post a further fall in EPS in the current year and next year. This suggests to me that dividend growth over the next couple of years may be relatively disappointing.
In the current year, BT is expected to maintain dividends at 15.4p per share. Since it has a share price of around 230p at the time of writing, this equates to a dividend yield of 6.7%. That’s around 220 basis points higher than the FTSE 100’s dividend yield, and may indicate that the stock has income investing potential at first glance.
However, 2019 is expected to be a year of major change for the company. A new CEO is set to take over in the next few weeks, and this may lead to a change in strategy in my view. From my experience, new CEOs often wish to make changes in order to try and enhance the long-term prospects for the business.
This could mean that there is a period of uncertainty or instability ahead for the BT share price. It may also mean there are changes to dividend payment forecasts. At the moment, dividends are expected to be covered 1.66x by EPS in the current year. As a result, I feel they are affordable. But a new management team may decide that the capital may be better spent elsewhere.
Therefore, while the stock has a high dividend yield relative to the FTSE 100 at the moment, I feel that it faces an uncertain outlook. I would view it as a recovery share, rather than an income stock, given its potential for change in 2019.