BT Group (LSE: BT-A) shares have dismally underperformed the FTSE 100 in recent times.  

New boss Allison Kirkby’s below stress to rescue the group’s popularity as a dependable earnings inventory. She’s already made an excellent impression on buyers, offering clear forecasts and a shock dividend enhance for 2023/24.

If BT’s dividend actually can return to sustainable development, I reckon the inventory might regain its crown as a dependable earnings decide. Is that this lifelike? I’ve been having a look on the newest Metropolis forecasts to seek out out extra.

Right here’s what I feel.

BT dividend forecasts 2025-27

Let’s begin with a take a look at the newest dealer forecasts for BT:

*Primarily based on a share price of 142p

The excellent news is that the Metropolis doesn’t appear to count on BT’s dividend to be minimize once more. However development isn’t anticipated to be very sturdy both.

Sadly, I feel there are two good causes for this cautious view.

Will the fibre rollout repay?

BT’s working laborious to improve its UK community from copper phone wires to fashionable fibre. This can be a massive venture and progress has been spectacular, for my part.  

The corporate says it ran new fibre previous one million premises through the three months to 31 March. That’s a document of 78,000 every week. I reckon BT’s rollout will enable it to guard its dominant market share. Naturally, the corporate hopes that by providing sooner web, will probably be capable of make promote costlier providers.

Sadly, Metropolis analysts don’t appear satisfied by this argument. Their forecasts recommend the group’s annual turnover will rise by simply 0.5% between 2025 and 2027.

Income are anticipated to rise by about 4% over the identical interval. No surprise dividend development’s anticipated to be low.

Pension blues

There’s one other downside. BT’s big pension scheme continues to be sucking large quantities of money out of the enterprise. Many FTSE 100 firms have seen their pension deficits disappear as rates of interest have risen.

BT’s deficit hasn’t disappeared. Actually, the corporate’s pension deficit rose from £3.1bn to £4.8bn final yr.

Pension accounting’s horribly complicated. However as a possible shareholder, all I have to know is that BT’s on the hook for annual money funds of £780m till 2030 to assist scale back its pension deficit.

As well as, the present dividend prices about £800m a yr. In order that’s £1.6bn of money flowing out of BT annually on the dividend and pension deficit alone.

BT expects to generate about £1.5bn of spare money this yr, rising to £2bn by 2027 and £3bn by 2030.

Will I purchase BT forward of a restoration?

I admit that issues might enhance as soon as the fibre rollout is completed. A possible alternative does appear to be opening up. And with the shares buying and selling on simply eight occasions 2025 forecast earnings, BT doesn’t look costly to me.

If the group’s turnaround goes higher than I count on, patrons right this moment might get low cost inventory and a rising earnings.

Nevertheless, I’ve heard this music earlier than. I’m not but satisfied BT can repair its pension issues and handle its spending commitments. Because of this, I feel there are significantly better dividend alternatives elsewhere within the FTSE 100 right this moment.