Today I am outlining why BT Group (LSE: BT-A) (NYSE: BT.US) could be considered an attractive addition to any stocks portfolio.
Sports packages proving a hit
BT attracted the ire of its customers late last month when it announced it was hiking line rental and broadband prices for some customers by up to 6.5%, with tariff changes set to come into effect from December. And for many, the move is the effect of the huge cost the telecoms giant has incurred by offering its BT Sport channels free to all of its broadband customers.
Of course, news of impending price rises can never be expected to have a positive effect on the customer base. But in the case of BT, I do not believe the decision will have a catastrophic effect on the top line, particularly as such increases are par for the course across the industry.
Rival TalkTalk elected to increase what it charges for its television and broadband packages in May, while British Sky Broadcasting chose to raise the cost of its Sky Sports programming from this month. So from a pricing perspective, BT is hardly losing ground to its rivals.
Instead, I believe that the firms decision to offer sports coverage to its high-speed internet clients without charge even if the company is having to subsidise the cost with price rises elsewhere comes attached with far more positives than drawbacks. Indeed, business saw revenues at its BT Consumer arm climb 10% during April-June to 1.1bn as internet and television uptake surged.
Dividends expected to explode
Even though BT is poised to continue splashing the cash in order to keep its sports network well furnished, particularly once the next round of FA Premier League broadcasting rights comes up next year, a backcloth of solid earnings growth is anticipated to underpin chunky dividend expansion in the medium term.
City analysts expect the firm to lift the full-year payout 16% during the 12 months ending March 2015 to 12.6p per share, and an additional 14% rise is predicted for fiscal 2016 to 14.4p. These projections create meaty yields of 3.3% and 3.7% correspondingly.
Given BTs accelerating success in the multi-services entertainment market, I fully expect shareholder rewards to keep heading through the roof in coming years.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended shares in BSkyB. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.