Investing.com — BT Group PLC (LON:) shares jumped 4.3% Tuesday after Bank of America upgraded the stock to buy from neutral and raised its price target to 282 pence from 213 pence.
The upgrade comes as BT exits its peak fiber investment phase this year, positioning the company for improved cash flow generation. BofA analysts noted that as capital expenditure declines materially from fiscal 2027, free cash flow is expected to increase toward the company’s £3 billion target by 2030.
BofA analysts highlighted the potential for a dividend re-rating as the primary catalyst for the upgrade. The bank sees increasing likelihood that BT will guide to a higher mid-term dividend payout as its fiber build completes and pension payments mature.
Former CEO Philip Jansen suspended BT’s dividend in 2020 and reinstated it 50% lower in 2022 to fund the company’s fiber investment. This year, BT will complete its plan with 25 million homes passed, 5 million more than initially anticipated.
BofA forecasts dividends per share of 8.5 pence for fiscal March 2026 and 9 pence for fiscal 2027, followed by a 25% re-rating to 11.3 pence in fiscal 2028. The bank projects average fiscal 2027-2031 cash flow payout of approximately 70%, aligned with peers. Current consensus has mid-term BT cash flow payout at just 35% as pension commitments mature.
On operations, BofA noted that BT retail has outperformed with more segmented targeting and the reinstatement of multi-brand offers. Line loss at Openreach has passed its peak, while UK fiber consolidation is underway.