BT progress

What I most like about BT is the progress it is making with its operations. After poor performances and stagnation in years gone by, 2021 saw it take great strides for the future. One way it is doing this is through the expansion of its full fibre broadband. Openreach, a division of the group, has now rolled out broadband to over 6m premises – and is on track for its 2026 target of 25m. Other measures include the continuous expansion of its 5G network, and the firm now has over 5m 5G-ready customers. With the potential for the UK to reach 800m 5G devices in 2022, according to the CCS, this shows the opportunity this market has to offer to BT. Should it be able to capitalise on this effectively, I think this could lead to us seeing a rise in the BT share price in 2022.

Recent announcements by the firm’s management will also provide investors with confidence. BT has brought forward its FY25 target of £2bn in annualised savings by a year, while the group also reduced its capital expenditure for FY23 by £200m. As a potential investor, these are the signs I look for.

I also think potential takeover speculation could fuel a rise in the BT share price. Patrick Drahi, who now holds an 18% stake in the business, has made moves to further increase his control in the firm. Although he cannot mount a full takeover bid until June of this year, further talk of a takeover by the renowned telecoms investor could boost the share price.

BT share price risks

One concern I have with BT is the potential impact rising interest rates could have on the cost of the firm’s debt. BT’s debt is substantial – with its latest results indicating it sits at £18.2bn – and higher rates will mean higher costs for BT, potentially stunting its growth. While this may be in part attributed to the expansion I have highlighted above, this is an issue for me.

200p in 2022?

That said, I think 2022 could be a strong year for BT. While the potential rising debt is of concern, the firm is heading in the right direction with the moves it is making. Further speculation of a takeover as we edge closer to June will more than likely result in a rise from the current share price of 174p. The share price broke the 200p threshold in June last year, and prior to a dip at the beginning of 2020, we also saw the stock as high as 204p. As such, if BT can replicate its 2021 form, I think we could see the share price edge above the 200p mark. Because of this, I would look to buy some shares. 

The post Will the BT share price hit 200p in 2022? appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

And even that high valuation comes after Vodafone shares have recorded a very modest 23% gain in five years, while quad-play operator BT Group, which is firmly back into the mobile market, has put on 120% in the same period — and BT shares are on a P/E multiple of only 14. Vodafone’s dividend yield is higher at around 5% compared to 3.5% from BT, but it’s only about half covered by earnings.

We’ve had full-year results from Vodafone on Tuesday, so is there anything in there that justifies this high valuation?

Critical revenues

Service revenues are going to be critical for Vodafone’s future, and the group reported a 2.5% rise over the year, with the recent fall in European service revenues apparently stabilizing with a 0.5% gain. EBITDA recorded at £11.6bn came in 2.7% ahead of the previous year on an organic basis.

Earnings per share were still weak, with an adjusted figure of 5.04p representing a 9% fall, but analysts have a return to growth of 18% forecast for the current year, followed by a 29% gain the year after.

All this, however, is difficult to quantify meaningfully, as Vodafone has been shouldering a lot of capital expenditure in recent years as it has been investing in its 4G networks across Europe. But chief executive Vittorio Colao tells us that “We have now successfully concluded our Project Spring organic investment programme“, and in the year just ended Vodafone’s capital expenditure has fallen by 6.5% to £8.6bn — and in the future, Vodafone expects that to fall to “the mid-teens as a percentage of annual revenue“.

Takeover on the cards?

Then there are persistent hopes in some quarters of a takeover attempt for Vodafone, or at least a merger of some sort, so is it looking any riper for the picking now?

In some ways, it surely is, with the company’s massive investment having extended the reach of its 4G capabilities significantly. Vodafone now has 46.8 million 4G customers and its coverage has reached 87% in Europe, so it might seem attractive in advance of those 4G profits starting to ramp up.

But I don’t see Vodafone as a cheap target by any means, as a significant number of investors doggedly hanging on in the hope of a quick takeover profit have kept Vodafone shares high. On the other hand, firms looking to jump into the quad-play market might see Vodafone’s mobile network as a tasty ready-made addition to their existing offerings, and might be prepared to pay handsomely for it.

Fundamentally pricey

The bottom line for me is that buying in the hope of a takeover is a pretty risky way to invest, and it’s not something I’d ever do. And on fundamentals, I see much better telecoms investments out there right now than Vodafone.

The post Do recovering profits mean you should buy Vodafone Group plc? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

When I’m home I’ll be either watching TV, working on my computer or browsing Instagram or Facebook on my phone. Modern life is dominated by technology. Surely, you would expect, companies that are part of this tech boom would be bound to do well?

Where is that game-changing deal?

Which leads us to the enigma of Vodafone (LSE: VOD). While the share price of telecoms and broadcasting peers such as BT Group and Sky have been rocketing over the past few years, the share price of Vodafone has been moribund since the sale of Verizon Wireless to Verizon Communications in September 2013.

This demerger was part of Project Spring, a much-vaunted programme of corporate activity that was meant to renew a company that seemed to be in its autumn. But while the Verizon sale has meant that Vodafone could make a few small-scale takeovers in Europe, and has allowed it to invest in network improvements and 4G, it has had little effect on the profitability of the business. The project hasn’t been able to arrest Vodafone’s slow decline.

There have been on and off discussions with Liberty Global, a telecoms giant that owns a range of brands around the world including Virgin Media. But nothing has materialised, and what has been notable by its absence is the lack of a big, all-encompassing, game-changing deal. The fact that three years have now passed since the demerger suggests that there may not be such a deal.

Sky did it by taking over Sky Italia and Sky Deutschland, allowing it grow in markets other than the UK. BT did it by expanding into pay-TV and sports broadcasting, and purchasing the leading broadband and telecoms firm EE.

Vodafone may have missed its chance

The profitability and share prices of both these companies have been on the rise, and these are my preferred investments in this sector. Meanwhile Vodafone seems to have been out-thought and out-flanked.

Part of Vodafone’s difficulty is that more of its revenues are made in a slow-growing Europe rather than high-growth emerging markets. And it also lacks a stake in a pay-TV broadcaster that can compete on a global stage with the likes of Sky.

However, if Vodafone has been lacking in earnings and share price growth, one major appeal of this stock is its income. A dividend yield of 5.05% is likely to be maintained or increased well into the future. This is one for the high-yield investor.

But those seeking out growth should look elsewhere, as Vodafone seems to have missed its chance to transform the telecoms sector. I can see better opportunities elsewhere in the FTSE 100.

The post Has Vodafone Group plc been left behind? appeared first on The Twelfth Magpie.

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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In fact, I added Vodafone to the Fool’s Beginners Portfolio back in 2012, as it looked good value, but after the Verizon disposal and rumours of a takeover bid by AT&T, the shares have been trading at what I see as takeover levels — which is too high for current fundamentals, in my view. I dumped Vodafone in December 2013, and I still think that was the right decision.

With the shares at 219p, we’re still looking at a P/E of over 45 based on expectations for the year to March 2016, and that would only drop to 28.5 by 2018 after two years of forecast earnings growth — still around twice the FTSE average. Predicted dividends of more than 5% wouldn’t be anywhere near covered by earnings even then. I still think Vodafone will return to winning ways, but right now I see the shares as too expensive and I don’t want any.

High street champion

Next (LSE: NXT), on the other hand, has been a favourite of mine for some time, and it remains so despite the company’s warning that “2016 will be a challenging year with much uncertainty in the global economy“. That came with full-year results this morning, and helped send the share price down 14% to 5,725p at the time of writing.

But Next is still raking in the cash in by the bucket load, and in the year to January 2016 the firm returned £568m to shareholders through dividends (ordinary plus special) and £151m through share buybacks. The 388p in dividends per share paid for the year (158p ordinary, 230p special) represents a total yield of 6.8%.

I’m normally very wary of fashion retailers, but Next has such a strong reputation for its buying expertise, and it sells decent clothing at decent prices, rather than riskier top-label clobber to the fickle end of the market. That, coupled with a likely P/E of around the FTSE average even if 2016 is a bit tough, and those better-than-6% dividends, makes Next a ‘buy’ for me.

Fill up with oil

And BP (LSE: BP), well, I don’t see how it can possibly not be a strong ‘buy’ today, with the shares down 32% from their June 2014 peak to 350p. The fall is entirely due to the slump in oil prices, but the timescale of it has not taken BP by surprise — chief executive Bob Dudley reckoned some time ago that we could be in a cheap oil spell for two or three years or more, but was happy that BP could ride it out just fine.

The price of a barrel has been hovering around $40 for a couple of weeks now, up from $30 levels in February, and if that trend continues then BP shares could be heading upwards sooner then expected. But even if it still takes a while longer, BP shares are still on a modest P/E of under 13 based on 2017 forecasts.

On top of that, there are dividend yields of 7.7% forecast for this year and next — and BP reiterated its “commitment to sustaining our dividend and then growing free cash flow and shareholder distributions over the long term” at full-year results time earlier this month. I don’t see why you wouldn’t want some of that.

The post Here’s Why I’d Sell Vodafone Group plc And Buy NEXT plc And BP plc appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

With the acquisition of EE, the UK’s largest mobile network, and its £2bn investment in sports and other prime telly, BT can now compete with the rest on all telecoms services. And with forecast P/E multiples of only around 13 to 14, it’s not an expensive foray into the sector.

Expensive mobile

Compare that with Vodafone (LSE: VOD), and you’ll see a company that only does mobile telecoms and whose share price has gone nowhere in the past five years – it’s the weakest performer of the four, with just a gain of 15% to 217p. Granted, Vodafone has higher dividends on the cards, with more than 5% forecast for this year and the next two. But they’re nowhere near covered by earnings, and the shares are on a P/E for the year to March 2016 of more than 44!

Vodafone is developing its next-generation network which will cover a fair amount of Europe, and that will surely boost profits some time in the future. But right now the outlook is uncertain, and the shares seem to be priced for a takeover – they’re too expensive in my book.

Second place?

The five-year share price record for Sky (LSE: SKY) isn’t too hot either, with just a 22% gain to 1,004p. Dividend yields come out slightly ahead of BT’s with 3.4% forecast for the year to June 2016, and they’re well enough covered and are progressive. But on P/E terms, the shares look a little pricey to me – this year’s forecast gives us a multiple of 16, rising to above 17 with an earnings fall predicted for 2017.

Sky’s biggest non-financial strength is its position on the premium TV market, and though BT has made small inroads and cable TV is a serious competitor, Sky looks like it will be the dominant provider, especially for sports, for the foreseeable future.

Security breach, oh dear!

TalkTalk Telecom (LSE: TALK) shares were actually outperforming BT until June last year, but they were already going off the boil before a damaging security breach in October 2015 exposed some customer data to hackers. Thankfully the damage was small, but it has shaken confidence in the company’s ability to protect its customers. The share price retreated to a five-year gain of 77.5% – better than Vodafone and Sky, but still way behind BT.

The price has regained 24% since February’s low, to 239p, and there’s strong double-digit earnings growth forecast for the next couple of years, but it would take until March 2018 to get the P/E down under 14 from today’s 25. TalkTalk also has what I see as a bizarre dividend policy. It’s been making uncovered payments for the past two years with the same expected for March 2016’s mooted 6.6% yield, but even by 2018 we’d still see it only just covered.

There’s room in the telecoms sector for all four to do well, but BT still looks the most prudent long-term buy to me.

The post Why BT Group plc Still Beats Vodafone Group plc, SKY PLC And Talktalk Telecom Group PLC appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Sky. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The Beginners’ Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and do not constitute advice to buy or sell.

The past few weeks of market turmoil have knocked the Beginners’ Portfolio back a bit, and we’re now only up 24.6% since inception in May 2012 (including all costs and spreads), compared with 34.3% at the end of 2015. But ironically it’s the “safer” shares that have been hurt the most, with the higher-risk growth constituents holding up well.

High-tech wonders

ARM Holdings (LSE: ARM) has actually disappointed a little since it was added in December 2014. After a promising first few months and a nice price rise, it’s been up and down ever since, and with the price today at 939p we’re looking at no overall movement at all once costs, spreads and dividends are included — the share price itself is up 2.8%.

But there’s nothing at all wrong with ARM’s fundamental performance, after adjusted EPS for 2015 came in 25% ahead of the previous year (with reported EPS actually up 33%). That came from a 19% increase in revenue in sterling terms, after 4bn ARM-based chips were shipped in the final quarter with microcontrollers and mobile device chips growing strongly.

Analysts are predicting a 43% rise in EPS this year, which would take the P/E down to 27 — that’s about double the FTSE average, but it’s the lowest ARM shares have been on for years.

Our investment in Apple (NASDAQ: AAPL) has done better, with a 50% total gain since January 2013, up to $96, thanks in part to the firm’s move to paying dividends. The price has flattened a bit of late, because of the possibility that sales might actually fall back a little this year.

But that’s a very short-term view, and to put it into perspective the company has just posted its biggest quarterly profit ever at $18.4bn after selling 74m iPhones. A vast proportion of the world’s population don’t have smartphones, and as wealth increases they’ll be buying them — and phone junkies will keep upgrading. Looking at that longer-term picture, on a P/E of only around 10.4, Apple shares still look cheap to me.

Plain old bricks

And finally to the portfolio’s biggest winner so far, Persimmon (LSE: PSN), which I added in July 2012 when the whole housebuilding sector looked insanely undervalued. Persimmon was in a strong financial position and was snapping up building land while it was going cheap, and that’s helped it post four years of EPS rises averaging around 50% per year.

The share price has soared to 2,060p today, and after adding in the firm’s special dividends (and deducting all costs), we’re on a 243% total gain. Is it time to take some profit? I don’t think so.

There’s an EPS rise of 28% expected for the year just ended, with results due on 23 February — and a January update told us of a 13% rise in revenue, with 8% more homes completed at a 4.5% higher average selling price. With the shares on a prospective P/E of 13, dropping to under 12 on 2016 forecasts, and dividends set to yield around 5%, Persimmon looks like it’s turning from a growth share into a strong income share.

The post Beginners’ Portfolio: Will ARM Holdings plc, Apple Inc. And Persimmon plc Drive Our Growth Forwards? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Safe dividend

Shares in BT Group (LSE: BT-A) are up only a modest 6% in the past 12 months, to 469p, but over five years they’ve rewarded investors with a 158% rise — with dividend yields of around the 3% level thrown in as a bonus. It comes after several years of solid rises in earnings per share, and though there’s a small EPS fall on the cards for this year due to the firm’s rights issue in 2015, growth is expected to resume in the year to March 2017.

BT’s acquisition of EE puts it firmly at the head of the UK telecoms sector, and though its dividend isn’t one of the highest around, it’s progressive and is surely one of the safest in the FTSE. A prospective P/E of 14.2 looks cheap to me.

High valuation

I’m less impressed by Vodafone (LSE: VOD) and its very high P/E of 45 based on March 2016 full-year expectations, dropping only as far as 38 on 2017 forecasts. The shares are down 3.6% over 12 months to 216p, and up only 19% in five years, after two years of rapidly dropping earnings due to the fall-off in plain old voice calls and the massive reinvestment in Vodafone’s next generation data networks in Europe.

Vodafone shares look priced possibly for a takeover bid, and rumours of a merger with Liberty Global are surfacing again after the two announced a joint venture in the Netherlands. But if that’s not behind the high share price, then there’s an awful lot of growth built into it today — there’s surely growth to come, but it seems too uncertain to me to justify such a lofty P/E.

And the very high 5.3% dividend yield doesn’t impress me, as it’s only around 40% covered by earnings.

Top telly?

If we turn to Sky (LSE: SKY) we see a 9% price rise in a year, to 1,021p, though only a fairly modest 30% in five years. Despite that, and after a couple of years of stagnating earnings, Sky shares are on a forward P/E of 16. That’s only a little ahead of BT’s, and its dividend yields are on a par.

In its recent interim results, Sky reported continued growth in customer numbers across its product offerings — it now has 21.5m customers and is expanding across European countries too. Though BT did well to grab control of a wedge of Premier League football rights, Sky remains the nation’s favourite supplier of pay TV.

Data breach forgotten?

Then we come to TalkTalk Telecom (LSE: TALK), and a 50% share price fall since June 2015, to 204p. Much of that was down to the embarrassing security breach it suffered last year, so could we be looking at an oversold bargain now?

Forecast EPS growth of 50% this year and 44% next would drop the 2017 P/E to 11.5, and provide a PEG ratio of just 0.3 — and that’s a very strong growth indicator. But the big concern is the very high predicted dividend yields of 6.8% and 6.3% respectively, because the earnings just aren’t there to cover them — this year’s would be uncovered, with next’s covered only 1.2 times.

My choice? I think the whole sector has great prospects, but my pick would be broadband leader BT, with Sky in second place — and with TalkTalk as an outside bet.

The post Which Is Best For 2016, BT Group plc, Vodafone Group plc, SKY PLC Or Talktalk Telecom Group PLC? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Sky. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A tasty dividend treat

While yields at drinks giant Diageo (LSE: DGE) have hardly set the world on fire, I believe the business remains an appetising selection for those seeking dependable dividend growth.

Indeed, despite the business having swallowed chunky earnings dips during each of the past two years, Diageo has remained committed to lifting the dividend. As a result, payments have advanced at a compound annual growth rate of 8.7% during the past five years, a very decent performance given the circumstances.

And while the murky earnings outlook at many of the London Stock Exchange’s largest constituents are causing dividends to fall like dominoes, I believe Diageo’s sterling bottom-line prospects make it a much more secure income selection. Indeed, labels like Johnnie Walker whisky and Guinness stout carry strong brand recognition and formidable pricing power that keep revenues riding higher regardless of wider market pressures.

My bullish take on Diageo’s dividend prospects are backed up by current City projections. The business is expected to lift the shareholder reward to 58.4p per share in the 12 months to June 2016 alone, up from 56.4p last year and backed-up by an anticipated 1% earnings advance.

Even though a 3.1% yield continues to lag the FTSE 100 forward average of around 3.5%, I fully expect this reading to keep on improving. That should happen as profits from Diageo’s critical North American marketplace, not to mention those from emerging markets, gallop higher in the years ahead.

A terrific income transmitter

Like Diageo, I believe that Vodafone’s (LSE: VOD) dividend profile should keep on improving as revenues head higher in established and developing economies alike. On top of this, the receding impact of Vodafone’s colossal £19bn Project Spring organic investment programme also bodes well for investor payouts in the coming years.

Vodafone has pulled out all the stops to resuscitate the fortunes of its critical European marketplace, a region previously suffocated by regulatory hurdles and immense competition.

But with vast sums having been ploughed into improving its data and voice services, and acquisitions like Kabel Deutschland enhancing its cross-selling opportunities in the ‘quad play’ entertainment market, demand for Vodafone’s products is steadily stomping higher again.

Thanks to its robust cash flows and positive earnings outlook, Vodafone is now expected to lift the dividend yet again for the year to March 2016, despite analyst forecasts of a third consecutive annual earnings loss – a 12% bottom-line  slide has been anticipated.

Indeed, a reward of 11.22p per share last year is now predicted to rise to 11.5p for both fiscal 2016 and 2017, yielding a market-bashing 5.3%. With continental sales taking off again, and demand in development markets heading through the roof, I fully expect dividends to march higher beyond next year.

The post Why Dividend Hunters MUST Have Diageo plc & Vodafone Group plc In Their Sights! appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

And in the past twenty years, the number of new-tech startups that have lost money for investors is pretty staggering.

Video advertising

Video technologist Blinkx (LSE: BLNX) was an early star with its technology for getting targeted advertising into video content, and the success of targeted ads on static web pages shows what potential there is. Blinkx’s early mover advantage was looking good at one stage, but the firm’s woeful failure to make the move to mobile computing in a timely manner could well have killed its chances completely.

That suggestion is supported by an interim profit warning this week, when Blinkx shocked us with the news that it expects a fall in revenue from $106m in the first half of last year to $85-95m this time round, leading to an adjusted EBITDA loss of $5-8m. That’s significantly behind analysts’ expectations, with forecasts sure to be downgraded now, and led to a 27% share price fall over the next two days, to 19.25p.

Although they’re back up to 21.5p as I write, Blinkx shares have lost 43% over the past 12 months — and they’re down a whopping 90% since their peak in November 2013. Is there a way back for Blinkx now? I wouldn’t put any of my own money on it.

Mobile cash

Monitise (LSE: MONI) is another that made a promising start, into the world of mobile electronic payments — an early mover, it even had Visa Inc on board as a partner and shareholder.

But it’s a business with relatively low barriers to entry, in which the big players have a significant size advantage — Apple Pay is making inroads, and Visa has moved on to develop its own system (and is not expected to renew its deal with Monitise). And rivals Paypoint and Optimal Payments seem to be going from strength to strength.  Monitise has not made a profit yet and is not forecast to do so for at least another couple of years, and there are some amongst us who fear it never will.

The share price has followed Visa’s mooted departure, with a fall of 88% over the past 12 months and a shocking 94% drop from February 2014’s peak, to today’s 6.1p.

Monitise’s chance lay in making sufficient inroads in the very early days, and possibly being snapped up by a big operator for a nice premium. I reckon it’s too late for that now, just as it’s too late for Blinkx to capture the market share its founders once dreamed of.

The post Is It Game Over For Blinkx Plc And Monitise Plc? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.