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BT shares (LSE: BT.A) are the itch I can’t resist scratching. Every month or two I return to the FTSE 100 telecoms stock, and worry away at it.

It’s dirt cheap and the yield is sky high. I’ve bought a heap of UK blue-chips matching that profile lately, and done pretty well out of them. Yet I can’t bring myself to buy BT. Anybody who knows its recent share price history will understand why.

The BT share price just falls and falls. It’s down 31.71% over one year and 54.35% over five. With other companies, that would tempt me.

By purchasing a stock when it’s cheap and out of favour, I get a lower entry price and higher yield. Theoretically, I get a bit of downside protection too, because the big falls are already in.

This stock is so cheap

There’s no buzz about BT shares, quite the reverse. Which means there’s little risk of buying at an inflated level.

However, just because a company’s share price has fallen by half, doesn’t mean it can’t halve again. The last time I was tempted to buy BT shares was three months ago, but I’m glad I didn’t.

The stock is down another 9.64% in that time. If I’d invested £5,000, my stake would be worth £4,518 today. I’d be down £482. Plus I’d be left with the nagging feeling that this isn’t the end of it. With BT, the news just seems to get worse.

So why do I keep clawing away at it? Its low, low forward price-to-earnings ratio of 6.75 times earnings for 2024 is one reason. Currently, the FTSE 100 as a whole trades at 12.4 times earnings.

Then there’s the income. BT is forecast to yield 7.36% in 2024. That’s close to double the FTSE 100 average of 3.8%.

Oh but the downsides! The reason the stock is so cheap is that most investors don’t want to touch it, and understandably so. And the reason the yield is so high is that the share price has fallen so far. There’s another danger. Earlier this month, broker UBS warned that BT may have to slash its dividend in half, to keep it affordable.

New boss Allison Kirkby is working hard to turn things around. Openreach’s ultrafast full-fibre broadband and 5G network will be available to 25m homes and businesses by 2026. The group is targeting £3bn of savings by the end of next year and will axe up to 55,000 jobs by the end of the decade.

Yet BT has to fight for customers in a competitive market, while handicapped by a huge pension scheme deficit and £20bn net debt. That’s almost double its £10.45bn market cap.

I’m still tempted, though. Did I mention it was cheap? JP Morgan Cazenove recently called the shares heavily undervalued and “ripe for a major re-rating”. It reckons today’s price of 105.35p could cut 290p. I’d love to get a piece of that. Yet still the shares fall. I’m not going to buy BT shares today. But that itch isn’t going away. Soon I might have to scratch it.

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By PREM SINGH

Hello, My name is Prem Singh. I'm a founder and technical writer. Talking about education, I am an engineering graduate. I enjoy learning new techniques and sharing my knowledge with others. Extreme foodie, world traveler, and history buff. I'm the author of MarketCapitalworld. I enjoy anticipating and pre-empting changing web trends, user behavior, and habits. At MarketCapitalWorld, I ask that you continue to support us in this manner, and I will continue to provide you with new information.

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