BT (LSE:BT.A) shares have outperformed the FTSE 100 in latest months, surging to just about 150p per share from a bit of over 100p.

This has, nonetheless, meant a falling dividend yield. Investing in the present day, I’d obtain 5.5% per 12 months, down from over 7% if I had invested in early Might.

Wanting ahead, analysts count on dividend funds to rise, however not by a lot. Let’s take a better look.

The above chart makes use of the consensus estimates of all of the analysts masking the inventory. As such, the downturn in anticipated dividends in 2027 could replicate the truth that probably the most bullish analysts haven’t issued a forecast for that 12 months.

Nonetheless, the broad consensus is that dividends received’t enhance quickly over the medium time period. That’s definitely one thing value making an allowance for.

By comparability, buyers might purchase Lloyds inventory in the present day with a ahead yield of 5.5%. Nonetheless, forecasts counsel the yield will likely be 6.9% based mostly on elevated dividend funds by 2027.

A favorite amongst analysts

BT is definitely one of the crucial undervalued shares on the FTSE 100, in keeping with the 17 analysts masking the inventory. The typical share price goal is 197.4p, inferring that the inventory is undervalued by 33.3%.

Nonetheless, it’s not a straightforward firm to worth as a result of it’s going by means of one thing of a transition. The rollout of Fibre to the Premises (FTTP) has raised prices by billions of kilos. Nonetheless, the corporate has now handed the height in its spending on this, so ought to now change into way more worthwhile.

Precisely how worthwhile is debated. The best share price goal for BT is 290p, whereas the bottom is 110p. It’s fairly uncommon to see such an enormous variance between the very best and lowest targets.

Nonetheless value an investing in?

I stated I used to be going to put money into BT inventory in Might however earlier than I had time to behave (I went away for every week), the inventory had surged 25%.

The problem I see now could be the margin for security has change into lots smaller. After I coated the inventory in early Might, it was buying and selling round 80% beneath its share price goal.

Coupled with a dividend yield of seven%, the inventory appeared like a slam dunk purchase for my portfolio.

Nonetheless, BT is now up 45% since Might. And as alluded to, the dividend yield is smaller, and the low cost — albeit one generated by analysts, who can get it incorrect — is lots smaller.

So, what ought to I do?

Nicely, I’m merely preserving an in depth eye on the inventory. Administration has promised £3bn of financial savings yearly by means of to the top of the last decade, and I need to see whether or not that’s life like.

I additionally need to see additional proof that debt is beneath management — web debt has surged to round £20bn — and that earnings are enhancing.