BT share price gains have outpaced its dividend growth. The shares are up more than 50% over five years and almost 15% over the past 12 months.
Allison Kirkby says BT now expects around £2bn in normalised free cash flow in the current financial year, rising to £3bn by the end of the decade. That is the base for a dividend path that BT says should move in low-to-mid single-digits until its finances meet BBB+ metrics.
Allison Kirkby on BT cash flow
BT's chief executive is tying the payout to cash generation rather than to short-term profit swings. The group reported pre-tax profit of £1.44bn in the year to March 2026, up from £1.33bn a year earlier, while normalised free cash flow fell 6% to £1.51bn.
The forecast matters because free cash flow is the money left after running costs and capital spending. BT is nearing the peak of its expensive construction phase, and Openreach has recently passed 23m premises with full-fibre broadband.
BT dividend path
BT has already moved a long way from the cuts of the early part of the decade. The dividend was cut from 15.4p a share to 7.7p in 2020, then cut to zero in 2021, before being restored at 7.7p in 2022.
For the year to March 2026, the full-year dividend reached 8.32p after a 2% rise. Even after that increase, the payout is still roughly half the 2019 level, so the income recovery remains gradual rather than complete.
BBB+ and BT.A
BT says annual dividend growth should stay in the low-to-mid single-digits until its finances meet the metrics associated with a BBB+ credit rating. In practical terms, that means the next step-up in income depends on whether the company can keep lifting cash flow while carrying £20bn of net debt and a £4.2bn gross accounting deficit in its pension scheme.
That leaves shareholders with a clear marker for 2027 and 2028. If BT gets closer to the £2bn and then £3bn cash-flow targets, the dividend has room to rise faster; if it misses those numbers, the payout path stays restrained, even after the recent share-price recovery in BT.A.
