Why BT shares just surged to six-year high
Ten years after the shares hit their post-financial crisis peak, the telecoms giant is fighting back. City writer Graeme Evans explains what’s going on.
5th May 2026 13:43
by Graeme Evans from interactive investor
Credit: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images.
A six-year high for BT Group (LSE:BT.A) shares was today fuelled by a City bank’s forecast that the telecoms company is closer to a dividend re-rating that could support a price above £3.
In an otherwise poor session for the FTSE 100 index, BT surged more than 6% in morning trade to 231p after analysts at Bank of America (BofA) switched to a Buy recommendation with a new price target of 282p.
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The shares are double their level of last year, having bounced by 23% since mid-December amid a sector-wide rotation, and on the back of BT’s own improved cash flow prospects as it enters the final straight of its mammoth full-fibre build programme.
The progress means that BofA sees scope for updated guidance on the mid-term trajectory of the BT dividend when chief executive Allison Kirkby presents annual results on 20 May.
The bank expects this year’s award will grow 4.2% to a “relatively prudent” 8.5p a share and to 9p in the company’s final year of elevated capital expenditure in 2027.
Assuming no major shift to pension contributions, the bank thinks that BT has the potential to consider a 25% re-rating in its 2028 dividend to 11.3p a share. Using a one-year forward yield in line with the FTSE 100 average of 3.5% would support a BT share price of 322p, it added.
BofA’s above-consensus dividend forecast compares with the 7.7p seen in 2022 after the payout was restored following its Covid suspension with a 50% cut versus the 2018-19 level.
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The size of the award by former chief executive Philip Jansen reflected the impact of full-fibre and 5G investment costs, as well as the company’s five-year modernisation programme.
Since then, the number of premises passed with BT full fibre has grown to more than 21.4 million and the company is on track for a target of 25 million by the end of 2026.
This progress has been significant in terms of the delivery of Kirkby’s guidance for a cash flow inflection to £2 billion in the next financial year and £3 billion by the end of the decade. This compares with the £1.5 billion expected in this month’s annual results.
Quarterly results in February also offered encouragement after they indicated that competition to Openreach from alternative network providers and the impact of a weaker overall broadband and new homes market has not been as severe as first thought.
BofA said today: “BT is operationally on track albeit not without challenges. UK pricing remains fierce (albeit with signs of easing), but BT Retail has significantly outperformed with more segmented targeting and the reinstatement of multi-brand offers.”
The bank said that current City expectations appear to show that BT would be under levered and under-distributing at 50% of cash flow. It notes the average European telco debt leverage of more than 2.5 times earnings and payout ratios close to 70% of cash flow.
The bank highlights the precedent of Dutch operator Koninklijke KPN NV (EURONEXT:KPN), regarded as BT’s closest peer in European telecoms, which recently announced a 25% increase in 2027 dividend for an average payout ratio of about 75% until the end of the decade.
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