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Offering a big dividend and threatening to break out -- BT Group bears watching

Here's a stock I found on the weekend's screen for Total Return Ratio (you can get a free preview of this and other screens that will soon be available at Alert HQ premium). The company is BT Group (BT).

BT is a UK-based provider of communications solutions and services operating in more than 170 countries. Its principal activities include the provision of networked IT services globally; local, national and international telecommunications services to customers for use at home, at work and on the move; broadband and internet products and services and converged fixed/mobile products and services. BT consists principally of four lines of business: BT Global Services, Openreach, BT Retail and BT Wholesale.

The perhaps more well-known entity British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group.

In addition to more mundane telecom activities like phone service, the company is also involved in some sexier projects like the next-generation trading floor project at the New York Stock Exchange. As it turns out, BT is a major provider of communications and voice recording for trading systems.

Here is some of the data on the company that makes it interesting:
  • Dividend is over 6%
  • PE is under 11
  • Price to Sales is only 0.54
  • Enterprise Value/EBITDA is 4.35
  •  Total Return Ratio is 3.04
In other words, BT has some characteristics of a deep value stock and sports a hefty dividend.

All is not perfect for BT, however. Price to Free Cash Flow lags the industry average. Revenues have been erratic though earnings seem to be on the mend (up 32% year-over-year). The following chart from Google Finance gives the picture:


Investors seem to be seeing the value in the stock and have bid the price up nicely lately. Here is the chart:


The price momentum has been strong lately but the stock is entering over-bought territory. Note the textbook pullback to the 200-DMA followed by another rally and the bullish crossover of the 50-DMA above the 200-DMA. A breakout above that $22.75 level and the stock could be off and running. Given that you could still call BT a value stock, valuation should not be an impediment to further gains.

BT Group has an interesting mix of characteristics, not least of which is that hefty dividend. I suggest this stock is one to watch.

Disclosure: no positions

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