Stock market

BT share price increased by 25% in May! Should I take it off in June?

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After years of suffering, Bt (LSE: BT.A) shares were finally priced in a show last month. It ended 25.76% higher than the month it started in May, which is quite a change. On FTSE 100only a reborn Hargreaves Lansdowne did better.

Long-term investors will still suffer. Over the year, BT shares are still down 11.07%. Over five years, they are down 32.6 percent. And that’s after taking into account the recent bounce.

BT Jump Oversold is a great ad to buy. FTSE 100 Stocks, which is exactly what I love to do. Unfortunately, it is not easy. Many investors in recent years would have taken that falling knife, and regretted it. Now there is another danger. Is it just a so-called dead cat bounce?

Beating the FTSE 100

BT shares jumped on a surprisingly upbeat set of results. Well, according to his standards. Annual profits actually fell by 31%. However, investors chose to look past that and celebrate CEO Alison Kirkby’s assertion that the group has a “Point of Disposition”As capital spending on its full fiber broadband program finally reached its peak. BT also hit its £3bn cost savings target a year early and plans to save a further £3bn by 2029.

Inevitably, I would have to pay more to buy BT shares today. When I last looked at them, a month or two ago, they looked cheap trading at just 6.75 times forecast earnings which has now risen to 12.8 times.

At the same time, the forecast yield has fallen from 7.36% to 5.94%. This is still comfortably above the FTSE 100 average of around 3.8 per cent, but not as good as it once was. Comfortably, it is forecast to grow to 6.24 percent in 2024.

High dividend income ahead

While shareholder payouts look more secure, free cash flow will double from £1.5bn this year to £3bn by 2030. Kirkby was confident enough to raise the dividend to 3.9% for 2023. With BT’s cash flow declining, I’m hoping for more.

I’m always wary of buying after a short, sharp stock spike like this. Some value stocks in my portfolio jumped to a positive set of results during the spring, including wealth managers M&G And Phoenix Group Holdings. Gravity quickly exerted itself. Investors’ bank profits, attention wanders, expectations recede, stocks revert to the mean. it happens.

BT still has major fundamental problems, including a high-profile pension scheme and net debt of £20bn. It is also operating in a highly competitive market. A positive set of results doesn’t wipe the slate clean.

The investment case has undoubtedly improved, but as a value seeker I think it’s a bit risky to buy BT shares after May’s results. If the excitement wears off, that’s when I’ll pounce. When I sit tight, I can watch overpriced FTSE 100 stocks to entertain me.

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