AT&T Yielding 6%+

[flintnational]

T is down 4% today. It's current dividend yield is over 6%. We have never really been invested in intermediate or long term bonds. (You can tell where this thread is going, right?) We have tended to use real estate for diversification. We have sold the RE, and are now sitting on 20% of our investable assets in Vanguard short term bond index, 10% is in an owner financed RE note (bond like) and 70% is in stock.

Two questions, what do you think of T as an investment? What do you think of T's yield as a replacement for a part of our short term bond index ? Our retirement is likely over funded and includes pensions and SS that will reduce our WR below 1%.

While I generally don't buy individual stocks, we bought Exxon when it dropped to $68 a few years ago. I bought it for the same reasons listed above, basically for a bond replacement with a 4% yield. Time to do it again with T?

 

[Dash man]

T has been heading in a downward trend for a while, mostly because of its debt load and uncertainty about the value of its acquisition of TWX. I’m well in the red now, but still get a great dividend. My plan is in December to sell it as a tax loss against some gains I have. I may buy it back after 30 days, but haven’t decided yet.
It’s a gamble to buy it now. But it does have decent cash flow.

 

[flintnational]

^^ It would be a yield play. So as long as they do not cut the dividend or go out of business, I would be okay with the 6% DY.

Edit to add: And the creek don't rise.

 

[Luck_Club]

I'm heavy in T, and XOM.
T+
They have been sliding for about a year, but the fundamentals all look positive. they pay about $2 a share, and have a diluted earnings of about $5 a share. So they have about 40% payout back to share holders. My philosophy on investing is show me the money!

The only thing that does scare me a bit is unlike exxon, they have a negative equity when you back out goodwill and other intangibles.

 

[Blueskies123]

Have you looked how much debt they have? What happens when interest rates go up and the their debt matures. You should look at when their debt needs to be rolled over and what interest rate they are paying. You can model the hit to the bottom line if interest rates go up 100 basis points or more.
How is their unfunded pension liabilities?
Let us know what you find out.

 

[aja8888]

Have you looked how much debt they have? What happens when interest rates go up and the their debt matures. You should look at when their debt needs to be rolled over and what interest rate they are paying. You can model the hit to the bottom line if interest rates go up 100 basis points or more.
How is their unfunded pension liabilities?
Let us know what you find out.

AT&T's pension liabilities are roughly 75% funded at the end of 2017. Can't find newer data. That's pretty much industry norm these days.

 

[flintnational]

Have you looked how much debt they have? What happens when interest rates go up and the their debt matures. You should look at when their debt needs to be rolled over and what interest rate they are paying. You can model the hit to the bottom line if interest rates go up 100 basis points or more.
How is their unfunded pension liabilities?
Let us know what you find out.

The debt is high but IMO, well covered by earnings. I don't know about the pension situation but a good point with any of these large historical companies. I will check on it. It has not come up as an issue in any of articles I have seen on T.

Edit to add: Looks like pensions are funded to 76%. Pretty standard. But a good point. Its one of the reasons I have not been tempted by GE.

 

[The Technician]

From a technical perspective, I would absolutely not invest in AT&T. If you own it, I would seriously consider selling it and using that money to invest in a stock that is displaying strength, not weakness.

AT&T hit a new 52-week low today and is in a long-term downtrend.

 

[flintnational]

From a technical perspective, I would absolutely not invest in AT&T. If you own it, I would seriously consider selling it and using that money to invest in a stock that is displaying strength, not weakness.

AT&T hit a new 52-week low today and is in a long-term downtrend.

Thanks for posting. You might want to introduce yourself at the "Hi, I am" thread.

 

[bobandsherry]

I'm heavy in T, and XOM.
T+
They have been sliding for about a year, but the fundamentals all look positive. they pay about $2 a share, and have a diluted earnings of about $5 a share. So they have about 40% payout back to share holders. My philosophy on investing is show me the money!

The only thing that does scare me a bit is unlike exxon, they have a negative equity when you back out goodwill and other intangibles.

Interesting to find similarities to what you wrote to what many said about GE before they tanked.

 

[nash031]

AT&T Yielding 6%+

I bought 675 shares of T on a limit order at 30.50 today. I think T is at least 25% undervalued right now, and it’s historical dividend payout is not a bad thing in a market like this. It’s not going to be a terrific growth stock, but as a value investment, I think it’s about as strong as anything out there right now. In fact, as someone looking at buying, I love the long term downward trend the technician pointed out, personally. T has taken advantage of it lately as well, buying back their own shares at an increasing rate over the last few quarters.

T has taken a beating because they took on debt to merge with Time Warner and the Justice Dept is roadblocking the merger. Those kinds of things are temporary and a company like T will recover IMO. I thought the fundamentals looked good enough. Debt is scaring off strict value investors, but as others pointed out, it is well covered by earnings IMO. I am in as of today.

 

[ownyourfuture]

I bought 675 shares of T on a limit order at 30.50 today. I think T is at least 25% undervalued right now, and it’s historical dividend payout is not a bad thing in a market like this. It’s not going to be a terrific growth stock, but as a value investment, I think it’s about as strong as anything out there right now. In fact, as someone looking at buying, I love the long term downward trend the technician pointed out, personally. T has taken advantage of it lately as well, buying back their own shares at an increasing rate over the last few quarters.

T has taken a beating because they took on debt to merge with Time Warner and the Justice Dept is roadblocking the merger. Those kinds of things are temporary and a company like T will recover IMO. I thought the fundamentals looked good enough. Debt is scaring off strict value investors, but as others pointed out, it is well covered by earnings IMO. I am in as of today.

Agree with most of what you stated, & I hope it works out 4 U, but I can't bring myself to pull the trigger........... at least not yet. When I see a stock like T & tell myself how great 'it should be' I always ask myself one question, why does the street hate it ?

 

[audreyh1]

Agree with most of what you stated, & I hope it works out 4 U, but I can't bring myself to pull the trigger........... at least not yet. When I see a stock like T & tell myself how great 'it should be' I always ask myself one question, why does the street hate it ?

The street hated Apple for a very long time, then boom (up).

 

[Mulligan]

From a technical perspective, I would absolutely not invest in AT&T. If you own it, I would seriously consider selling it and using that money to invest in a stock that is displaying strength, not weakness.



AT&T hit a new 52-week low today and is in a long-term downtrend.

If you like that chart, back it up to 1999 from pre “New AT&T” to present day....You will really love that one. Its a factory of sadness stock and the factory runs 24/7. But I have to admit, I have been kicking the tires and thinking a bit myself here though.

 

[aja8888]

The street hated Apple for a very long time, then boom (up).

You can add Amazon to that list too.

 

[imoldernu]

Try this.... a look into Comcast, AT&T, Disney, 20th Century Fox, Sky and Time Warner...

https://seekingalpha.com/article/4190577-television-takeover-need-know

 

[Luck_Club]

T vs FB
Enough said..

 

[YVRRocketSurgery]

Rising interest rates have given Canadian telecom stocks a bit of a rough ride for the first half of this year too.
There was an interesting comment made by the CEO of BCE who said they would generate more cash flow if interest rates go up an expected half a percent since their pension will move to a surplus and they would not have to provide funding. Perhaps AT&T's pension liability would also benefit from rising rates?
Debt is obviously a concern but how much of a struggle it is is obviously dependent on their cash flow and how they manage their debt financing (how much is coming up for renewal, how much is financed by long term bonds, asset sales).

I'm heavy with the Canadian telecoms, which are likely facing similar challenges, for the yield to provide a base. But I haven't completely used them as a bond/fi replacement.

One X factor is 5G which should be rolling out in full force over the next few years and how much the telecoms can capitalize on this leap in technology.

 

[target2019]

T can support the dividend. But earnings growth estimated at 2.1%. That is not good, and I'd expect the stock price to stay flat.
VZ looks better with double the earnings growth of T (estimated).

 

[flintnational]

......... Its a factory of sadness stock and the factory runs 24/7.,......

The DW w*rked for NCR when they were purchased by T. You described my impression of T exactly. But, here I am 27 years later taking a peak again. You would think I had learned my lesson. But, but it's a 6% dividend!

 

[Montecfo]

A low growth high yielder is risky in a rising rate environment. Lots of debt and many moving parts.

I would look for something with more growth.

 

[nash031]

Agree with most of what you stated, & I hope it works out 4 U, but I can't bring myself to pull the trigger........... at least not yet. When I see a stock like T & tell myself how great 'it should be' I always ask myself one question, why does the street hate it ?

I think the street hates it because the street isn't all that great at what it does, and T isn't very sexy. They tend to feed off of each other. Many analysts don't like their earnings growth potential because they're focused on the wireless business (as is another poster in this thread) but not paying enough attention to T's other business lines which could grow very well. In either case, the stock is undervalued, and the management knows it and is buying the stock back while the street continues to beat it up. That's my take, anyway.

This thread has largely boiled down to a growth vs. value investment discussion/debate. There are plenty of indicators that earnings growth isn't going to be great, but cash flow is good, it's now the 5th largest company in the US, paying high yield and is undervalued by every measure I ran, including past earnings growth and growth projections, at near $30. I'm happy with my purchase at $30.50, and confident in their ability to continue the payout. A return to fair valuation would make this a very strong investment and I'm confident that there was enough margin between my valuation and my purchase price that I'm going to end up making money on this above market average. Time will tell!

 

[wmc1000]

We have almost 7500 shares of T and yes we are in the red but look at it as a dividend stock so we continue to reinvest the divvys for more shares. Might consider reducing IF the stock returns to around $40 as most of our buys were in the low to mid $30 range.

If not we will hold it for at least the next 10 years unless something major were to happen with the dividend structure.

 

[copyright1997reloaded]

Disclaimer: T is my 6th largest non-mutual fund holding.

I originally bought T in 2009 (in the mid twenties) when the stock had fallen sharply and after they picked up the Apple exclusive iPhone contract. Over the years, I've picked up more shares.

What is worrisome about T is that just about all of their businesses are slowing declines and they have bunches of debt. While the Direct TV Now business is showing some promise, their traditional satellite business is declining.

With the Time Warner acquisition, if they are going to compete in the content arena (Time Warner, HBO) and streaming services (Direct TV Now, HBO Go), they should seriously consider cutting their dividend to provide both relief on the cash flow front and to give them more capital to pay down debt and produce content. However, I do understand that would require a massive change and negative impact to their shareholder base.

Honestly, I sold a small part of my holdings a few weeks ago to do some tax loss harvesting (and to simply reduce my exposure to the stock). I'm mad at myself for not having done so considerably earlier when the stock was in the high thirties/low forties, as my assessment then was similar to now.

The dividend does provide some down side protection, but if interest rates increase or their cash flow situation deteriorates, it might have more downside exposure.

 

[bobandsherry]

Other ways to get 6% dividend with quality preferred offering if you truly want to get a dividend stock. Or consider floating rate preferred as protection against rising rates. If rates increase the dividend isn't going to hold price for T, and all the debt and deteriorating business, well just feels like GE all over.... T may be a play, but better options to be found.