BT Group (LSE: BT.A) shares continued their down week with a 5% fall Thursday (21 May), following a poorly-received set of full-year results. Still, they bounced back a bit Friday morning.

CEO Allison Kirkby opened with: “FY26 was another year of strong delivery against BT’s strategy. We are building the UK’s digital backbone even faster and further, connecting the country like no one else and accelerating our transformation.“

BT rolled out fibre connections to more than 4.8m premises by the end of March. That’s more than two-thirds of UK homes and businesses covered. Openreach made 2.2m net new fibre connections. And EE’s 5G now reaches 73% of the population.

It all sounds great, so what didn’t the market like on the day?

Record rollout, but…

It isn’t translating into more of the folding stuff. Reported revenue fell 3% to £19.7bn, with adjusted EBITDA flat at £8.2bn. All this expansion costs money, and BT racked up £5.1bn in capital expenditure over the year. And that helped knock free cash flow down 6% to £1.5bn.

Still, the company raised its total dividend 2% to 8.32p per share — for a 3.6% yield. That might not look brilliant at a time when inflation is so high. But management intends “to grow the dividend by low to mid single digit percent per annum in FY27 and onwards until metrics consistent with a BBB+ credit rating are reached; thereafter residual cash flow will be available for enhanced distributions to shareholders.“

So, fair to middling dividend growth until BT’s credit rating steps up a notch, and then bigger distributions of cash. That sounds attractive enough to me as a dividend investor.

But a couple of things still unsettle me.

Rocky road

The share price has risen 25% over the past five years — all since BT hit a pivot point with 2024 full-year results. But if we look at the longer term, it’s all a bit up and down. And BT shares have still had a poor decade, losing a third of their value.

BT’s big net debt poses a hovering background threat too. It edged up to £20.0bn for the year just ended, from £19.8bn the year before.

There’s a tempting strategy for potential investors to consider here. Just keep taking the dividends, and ignore the rest as noise. If nothing is enough to disturb those long-term cash handouts, there’s no need to worry about anything else, right?

What should we do?

Well, it’s never a good idea to take dividends for granted. BT does project normalised free cash flow of around £2.0bn in the 2026-27 year, and up to £3bn by the end of the decade.

The trouble is, we keep hearing these glowing outlooks… while still waiting to see the actual cash at year-end time. And this industry is cyclical in terms of technology too, so it’s hard to make long-term assumptions about capital expenditure.

Once again I’m torn. But on balance, I think investors might do well to consider some of the bigger FTSE 100 dividend yields out there, with better expenditure clarity and less debt danger.

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Alan Oscroft does not hold any positions in the companies mentioned.