City reacts to BT’s new dividend policy
With annual results pretty much in line with expectations, attention has shifted to the outlook for income over the next few years. Graeme Evans explains the analysts’ view.
21st May 2026 12:54
by Graeme Evans from interactive investor
Photo: Finnbarr Webster/Getty Images.
Income prospects for about 584,000 BT Group shareholders became a little clearer today after the telecoms group used its annual results to unveil an updated dividend policy.
BT, which owes its large ownership base to the Buzby-branded privatisation in 1984, intends to distribute 5.87p a share on 9 September as part of a 2% hike in the 2025-26 total to 8.32p.
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The new guidance will see the dividend grow by a low to mid-single digit percent in 2026-27 and onwards until financial metrics consistent with a BBB+ credit rating are reached.
BT, whose net debt position stood at £20 billion at the end of March, said residual cash flow will then be available for enhanced distributions to shareholders.
Bank of America pushed back its dividend re-rating expectations by a year to 2028-29 following today’s guidance, but said the upside at this point could be more than its earlier forecast of a 25% hike.
The bank highlighted recent comments by credit ratings agency S&P that a change from its current BBB stance was unlikely over the next 24 months.
BT shareholders got a total of 15.4p in the 2018-19 financial year before the payout was cut completely during Covid and then restored with the award of 7.7p in 2021-22.
The size of that distribution by ex-chief executive Philip Jansen reflected the impact of full-fibre and 5G investment costs, as well as the company’s five-year modernisation programme.
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Since then, the number of premises passed with BT full fibre has grown to 23 million and the company is on track for a target of 25 million by the end of 2026.
That milestone will mark a turning point for the company, as reduced capital expenditure is set to underpin an improvement in cash flow to £2 billion in the new financial year and £3 billion by the end of the decade. This compares with £1.5 billion in today’s results.
The figures for the year to 31 March showed revenues declined 4% on an adjusted basis to £19.6 billion, leading to flat underlying earnings of £8.2 billion and 3% drop per share to 18.3p.
Revenues and earnings for the fourth quarter were a 1% miss and a 1% beat against City expectations respectively, alongside some positive operating trends after BT reported 203,000 broadband line losses at the Openreach wholesale arm.
The resulting full-year figure of 825,000 came in below BT’s original guidance of 850,000 as competition from alternative network providers has not been as severe as first thought. The group expects further losses of 800,000 in the new financial year.
Openreach’s take-up rate among all major fibre providers now stands at more than 38% after net additions of 2.2 million in the year took the total number of connections to 8.8 million.
In the BT, EE and Plusnet consumer business, the average revenue per user fell 1% to £41.70 in broadband and down 1% to £19.30 in postpaid mobile amid a competitive market.
Consumer underlying earnings fell 2% to £2.6 billion, which compares with a 5% rise to £4.2 billion for Openreach. BT’s Business division fell 5% to £1.27 billion, although it made turnaround progress following contract wins including BAE Systems and easyJet.
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Chief executive Allison Kirkby said: “We have delivered on our financial guidance and we are transforming ahead of plan, offsetting headwinds while successfully competing.”
She forecast adjusted revenues for 2026/27 of between £19 billion and £19.5 billion, leading to earnings of £8.2 billion-£8.3 billion.
BT shares fell 6.8p to 224.1p, having more than doubled in the past two years to reach last week’s multi-year high at 240p.
Bank of America, which has a price target of 282p, said: “We reiterate our Buy rating, with a ‘when-not-if’ cash return re-rating event.” Morgan Stanley was at 260p prior to today’s results.
ii's head of editorial Lee Wild owns BT shares.
ii was recently named Best Overall Trading Platform for dividend investing by MoneyMagpie, believing it to be “one of the strongest all-round options available in 2026”.
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