BT Group PLC (LSE:BT.A)<\/a> dividend growth could be constrained by pressure to reduce debt amidst rising UK government bond yields, according to UBS analyst Polo Tang, offsetting\u00a0improving free cash flows at the telecoms group.<\/p>\nRising UK government bond yields make BT\u2019s dividend look less attractive, with the analyst noting that the company\u2019s forward yield falling below 4% from 4.5% in February as shares have rallied.<\/p>\n
Investors have increasingly expected management to raise shareholder payouts as free cash flow improves from about \u00a31.5 billion in the 2026 financial year to \u00a32 billion in 2027 following a fall in fibre network spending.<\/p>\n
However, Tang said credit rating targets were likely to limit the scope for significant dividend increases in the near term.<\/p>\n
BT\u2019s leverage is estimated at around 3.2 times earnings, compared with a target of below 2.75 times to support management\u2019s aim of maintaining a BBB+\/Baa1 credit rating.<\/p>\n
With earnings growth likely to remain limited, reducing leverage would probably require debt repayment rather than materially higher shareholder distributions, the analyst added.<\/p>\n
BT\u2019s fourth-quarter results are due on 21 May, with Tang forecasting guidance will be for around \u00a32 billion of free cash flow in 2027, alongside easing customer losses at Openreach and continued growth in consumer service revenues.<\/p>\n
But he warned that some of these positives could prove temporary. UBS forecasts are for group revenues to decline by 1.6% annually over the next three years, compared with consensus expectations for a 0.6% fall, amidst pressure on fixed-line revenues and growing competition from broadband resellers including Sky, Vodafone and TalkTalk.<\/p>\n
UBS reiterated its ‘sell’\u00a0rating on BT alongside a 12-month price target of 175p, compared with a last closing price of 236.2p.<\/p>\n","protected":false},"excerpt":{"rendered":"BT dividend growth may be limited by debt targets as gilt yields rise, warns UBS Proactive uses images…\n","protected":false},"author":2,"featured_media":63495,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[129],"tags":[34745,34743,34741,19098,2353,2125,1105,34742,34746,34744,223,1966],"class_list":{"0":"post-63494","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ubs","8":"tag-bond-yields","9":"tag-bt-dividend-growth","10":"tag-bt-group-plc","11":"tag-credit-rating","12":"tag-dividend-growth","13":"tag-earnings-growth","14":"tag-free-cash-flow","15":"tag-free-cash-flows","16":"tag-gilt-yields","17":"tag-polo-tang","18":"tag-ubs","19":"tag-ubs-proactive"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ch\/116556155241341297","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/63494","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/comments?post=63494"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/63494\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media\/63495"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media?parent=63494"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/categories?post=63494"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/tags?post=63494"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"BT](\"https:\/\/www.europesays.com\/ch\/wp-content\/uploads\/2026\/05\/a0bc3ad1b56ab458d9983d7aa108e920.jpeg\")
BT dividend growth may be limited by debt targets as gilt yields rise, warns UBS Proactive uses images sourced from Shutterstock <\/p>\n