Should I Buy BT Group for My ISA?

LONDON -- I believe that BT Group's (LSE: BT-A  ) (NYSE: BT  ) aggressive strategy to build its broadband and television portfolios should underpin solid growth over the long term.

The company operates a lucrative dividend policy, making it a great pick for your tax-efficient stocks and share ISA (just click here for more information on how to maximize returns from ISAs). In my opinion, BT's improving earnings potential should enable it to maintain its policy of generous shareholder payouts.

Broadband and television operations ratchet up
BT continues to build market share in the U.K. broadband market, and bolstered its weighty presence further following last month's 4G services auction. The company forked out 186 million pounds for the license to 2 x 15 MHz at the 2.6 MHz range, a move designed to enhance its wireless broadband services and allow connectivity to more remote parts of the country.

Elsewhere, BT is stepping up the fight with consolidated services heavyweight British Sky Broadcasting by steadily buildings its television portfolio to offer a rival "triple play" package.

BT agreed to buy ESPN's U.K. and Ireland television channels late last month in a bid to bolster its BT Sport package, which is due for launch this summer. The deal gives BT the broadcasting rights to a host of top-notch football competitions, including the FA Cup and UEFA Europa League, in addition to the 38 English Premier League matches it has already agreed to show over the next three seasons.

A recent survey by broker Liberum Capital suggested that BT is gaining more interest from potential customers, with 37% of respondents in February claiming that they would consider switching from Sky, up from 25% in October and 28% in July.

The broker anticipates new BT Vision subscriptions will jump from around 100,000 per year to 250,000, mainly on the back of BT's ability to substantially undercut Sky on a price basis.

Earnings on course to tread higher
City analysts expect earnings per share to maintain a steady ascent in coming years -- a 5% forecast increase to 24.9 pence for the year ending March 2013 is anticipated to rise 1% to 25.1 pence in 2014, and 7% to 26.9 pence in 2015.

I reckon that the telecoms giant represents decent value for money at current prices. A P/E reading of 10.8 for this year is forecast to slip to 10.7 in 2014, before sliding to 10 during the following 12 months.

BT also looks a canny pick for income investors seeking to latch on to excellent prospective dividend growth. A projected yield of 3.5% for 2013 -- matching the average payout yield for the FTSE 100 -- is expected by City experts to accelerate to 4% and 4.5% in 2014 and 2015 respectively.

After slashing its dividend in 2009 due to heavy earnings pressure, the company has rebuilt its progressive dividend policy that is now safeguarded with much better dividend coverage. Meaty forecast coverage of 2.6 times for 2013 is expected to remain high at 2.4 times and 2.2 times for 2014 and 2015.

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