Here is the dividend forecast for BT shares until 2027

BT (LSE:BT.A) shares have outperformed FTSE 100 Index In recent months, rising to almost 150p a share from just over 100p.

However, this has meant that dividend yields have fallen. If you invested today, you would receive 5.5% per year, compared to 7% if you had invested at the beginning of May.

Looking ahead, analysts expect dividend payments to increase, but not by much. Let's take a closer look.

The chart above uses consensus estimates from all analysts covering the stock. Therefore, the drop in expected dividends in 2027 may reflect the fact that the most optimistic analysts have not issued a forecast for that year.

However, the general consensus is that dividends will not increase rapidly in the medium term, which is certainly worth keeping in mind.

In comparison, investors could buy Lloyds The stock is trading today with a forward yield of 5.5%. However, forecasts suggest the yield will be 6.9% based on increased dividend payments through 2027.

A favorite among analysts

According to the 17 analysts covering the stock, BT is one of the most undervalued stocks in the FTSE 100 index. The average target price for the stock is 197.4p, implying that the stock is 33.3% undervalued.

However, it is not an easy company to value because it is going through something of a transition. The rollout of fibre to the premises (FTTP) has increased costs by billions of pounds. However, the company is now past the peak of its spending in this area, so should now be much more profitable.

Exactly how profitable it is is debated. The highest target price for BT shares is 290p, while the lowest is 110p. It is quite unusual to see such a large variation between the highest and lowest targets.

Is it still worth investing?

I said I was going to invest in BT shares in May, but before I had time to act (I was gone for a week), the shares had risen by 25%.

The problem I see now is that the margin of safety has narrowed significantly. When I covered the stock in early May, it was trading about 80% below its target price.

Coupled with a 7% dividend yield, the stock seemed like a safe buy for my portfolio.

However, BT is up 45% since May and, as mentioned, the dividend yield is lower and the discount (albeit generated by analysts who may be wrong) is much smaller.

So what should I do?

Well, I'm just keeping a close eye on the stock. Management has promised £3 billion of savings every year until the end of the decade, and I want to see if that's realistic.

I also want to see more evidence that debt is under control (net debt has risen to around £20bn) and that earnings are improving.