In the past 30 months, BT (LSE: BT.A) has been on a tear. Since May 2024, BT shares are up by slightly more than 100%. On top of that, they now yield 3.9%.

That means an investor who bought back then would now be earning close to 8% (as dividend yields are a function not only of the dividend paid but also what the share cost you).

That yield is still well ahead of the 3.1% currently offered by the FTSE 100 overall. So might BT shares potentially still be a bargain even now?

A difficult business to unpack

One of the challenges of investing in BT shares is understanding exactly what you are getting.

There is the legacy telecoms business, of course. It is easy to see this as being in some sort of terminal decline. In reality, the consumer business grew revenue 2% year-on-year in the first half of the year, while the business division shrank only 1%. The consumer business was the biggest contributor of normalised free cash flow to BT overall.

As well as that there is Openreach. The digital network provider has long been seen by some in the City as a potential spin-off from BT.

However, while there is some logic to that, it remains firmly in the BT nest and so I think ought to be valued on that business. While Openreach generates sizeable revenues, it also incurs significant costs.

Speaking of significant costs, there is also the wildcard of BT’s legacy pension programme. From time to time the need to top its coffers up can eat into BT’s profits.

Indeed, the first half saw net debt grow to £21bn (equivalent to the company’s whole current market capitalisation) in part because of pension contributions. These may continue for decades and I see a risk that turbulent stock markets could shift valuations, leading to the need for more contributions to the pension scheme.

Ongoing opportunities, but ongoing challenges

That complexity informs my decision not to buy BT shares at this time. On one hand, as the strong performance over the past few years shows, there is real potential here.

The company has a large installed customer base, proven business model and strong brand. It is profitable and has significant ongoing cash generation potential.

Even at today’s price, I believe BT shares could potentially turn out to be a bargain in years to come.

On the other hand though, BT has often performed unevenly. I expect that to continue, partly because of the sporadic need for pension contributions but also because its core business requires a lot of capital expenditure and operates in a competitive market.

The yield is attractive to me, but I am mindful that BT has not only cut but cancelled its dividend altogether on more than one occasion over the past couple of decades.

There are other UK stocks with juicy dividend yields that I think have easier to understand businesses and more predictable long-term spending patterns. So for now, I am looking beyond BT shares to hunt elsewhere for quality UK stocks to buy for my portfolio.

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Christopher Ruane does not hold any positions in the companies mentioned.