Image source: Getty Images The BT Group (LSE:BT-A) share price has slumped 28% during the past 12 months. This means that, based on current dividend forecasts, BT shares carry a 6.1% yield for the current financial year (to March). This is far above the 3.7% average for FTSE 100 shares. And the telecoms giant offers a similar yield for the next fiscal year too. Do these high yields make this a brilliant stock to buy for income investors? Or does BT’s sinking share price suggest this is one to avoid? BIG dividends During the height of the pandemic, the business first reduced and then axed shareholder payouts entirely. But in the last financial year, it resurrected its dividend policy and paid a total 7.7p per share reward. City analysts aren’t expecting blistering payout growth over the short term. But predicted dividends of around 7.8p per share for this financial year and next still create those market-beating yields. These expected dividends are more than covered by anticipated dividends too. Coverage sits at 2.6 and 2.4 times for financial 2023 and 2024 respectively. Positive steps Encouragingly, BT is taking steps to build up its balance sheet. These could give the company added headroom to pay the large dividends City analysts are predicting. Last month, it announced plans to merge its Global and Enterprise units in a move that will save it £100m by the end of fiscal 2025. These will contribute to the company’s plans to shave £3bn off its cost base over the same period. BT also says that the merger of Global and Enterprise will boost its ability to develop products and services in the fields of “next generation connectivity and unified communications, multi-cloud networking, and advanced security solutions”. The business famously operates in a highly competitive marketplace. So the move could be important to help it grow long-term profits. Fragile forecasts But as a potential investor, I’m still worried that dividends could disappoint in the short-to-medium term. This is chiefly because of the company’s high debt pile. Net debt rose by an extra £801m year on year to stand above £19bn as of September. And its financial obligations could continue to soar too as the company spends heavily to expand its broadband network across the UK. I’m also concerned that BT’s dividends could come in lower than forecast as the British economy sinks. Revenues edged just 1% higher in the six months to September. I think they could reverse before too long as cash-strapped households and businesses look for cheaper media service providers. BT could also choose to hold back cash to prepare for a prolonged recession. Dividend coverage of 2 times and above is said to provide a wide margin of safety for investors. But in the case of BT, I’d be looking for better protection in light of the threats outlined above. On balance I’d rather invest in other FTSE 100 income stocks right now.
