AT&T Yielding 6%+

[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]

Quote:

Originally Posted by ownyourfuture 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.

[traineeinvestor]

Quote:

Originally Posted by copyright1997reloaded What is worrisome about T is that just about all of their businesses are slowing declines and they have bunches of debt.

The combination of a deteriorating business and high debt is enough to put me off no matter how good the dividend yield is.

As a retiree, as much as I like a decent yield, I am more concerned with how sustainable that yield is and whether it can grow to offset inflation than how big it is at the moment.

[flintnational]

Good points. I think copyright1997 is correct to point out the dividend may need to be cut if T is going to compete in the content area. I did notice other content providers do not pay dividends anywhere near T's yield. Thanks all. I am on hold at the moment.

Edit to add: As a confirmed indexer I must admit it is a little scary over here on the dark side. Now that I have tasted the forbidden fruit of stock picking, whats next? Market timing? Then you are just one step away from crypto-currency. When will it stop?

[Bigdawg]

Quote:

Originally Posted by flintnational Edit to add: As a confirmed indexer I must admit it is a little scary over here on the dark side. Now that I have tasted the forbidden fruit of stock picking, whats next? Market timing? Then you are just one step away from crypto-currency. When will it stop?

posting at 0342 on a Sunday? Maybe invest in a pharma? Something to get to sleep?

[jjflyman]

The only 2 individual stocks I am invested in is XOM, and I just added T to that list this week after it dropped.
I am very happy to take a 6% dividend

[flintnational]

Quote:

Originally Posted by Bigdawg posting at 0342 on a Sunday? Maybe invest in a pharma? Something to get to sleep?

Yes, I am an early riser. But then I am usually in bed at 9. Saves on liquor bills. The "night life" line in our budget is pretty skimpy.

[nash031]

Quote:

Originally Posted by traineeinvestor The combination of a deteriorating business and high debt is enough to put me off no matter how good the dividend yield is.

I think your definition of "deteriorating business" and mine are different. I think if you're focused on one or two specific business segments, they are "deteriorating", but there's a lot more to the whole of the company, in my opinion, than is given credit for by some here. I've been wrong before.

[aja8888]

Quote:

Originally Posted by traineeinvestor The combination of a deteriorating business and high debt is enough to put me off no matter how good the dividend yield is.

Hmmm, isn't this just the reason T made the TW acquisition?

[nash031]

Quote:

Originally Posted by aja8888 Hmmm, isn't this just the reason T made the TW acquisition?

I think it is. I think a big part of the "negative long term trend" the technician pointed out over the last two years is largely related to negative news with respect to the Justice Dept and this merger. In all, it's going to go through eventually, and I expect the negative press will die down, with T returning to fairly valued from its current (IMO) undervalued state. I think this is similar to when AAPL was all negative in the news a back in 2013, though AAPL clearly had more room for growth than T does, again IMO.

[Montecfo]

The stock declined when the judge ruled. So I think investors are wary of the debt and low growth in rising rate environment.

The merger has already happened BTW, 6 weeks ago.

[nash031]

Quote:

Originally Posted by Montecfo The stock declined when the judge ruled. So I think investors are wary of the debt and low growth in rising rate environment. The merger has already happened BTW, 6 weeks ago.

The merger has happened, but none of the acquired businesses have actually been reflected in anything meaningful. So the debt sits there with nothing to show for it to this point. So yes, they incurred a lot of debt to do so, but as others have pointed out several times in this thread, cash flow covers it, and the long-term debt to asset ratio is not eye-opening, at least not in my estimation. Again, I've been wrong before. Anyway, the debt is baked into the share price as it stood before the recent dip below 31. Recently, the stock dropped with the quarterly financials came out still reflecting the debt on the books, but really nothing new was reported because nothing had changed.

[Montecfo]

The assets are on the balance sheet and so is the debt.

The forecasts and guidance reflect the acquisition.

[nash031]

Quote:

Originally Posted by Montecfo The assets are on the balance sheet and so is the debt. The forecasts and guidance reflect the acquisition.

The debt to asset ratio isn’t bad, and cash flow more than covers it. Not sure how anyone accurately forecasts a situation like this... that is, they don’t. Anyway, my opinion is known. Time will tell.

[Canned at 62]

Yield is not the same as interest.

If I have a $1000 in a bank that pays 3% interest, at the end of the year I have earned $30.

If I own T (ATT) and have $1000 in shares and it has a 6% yield, the dividend is paid quarterly. The night before the dividend is paid the price of the share is adjusted down to the to the same as the dividend. If you reinvest the dividend you are equal. If you spend the dividend your account is now 6% less than before.

High yield stocks like ATT (T) historically have much lower total return than a total stock market ETF. For example, if you invested $1000 in T on January 1st, 2000 it would be worth $964 today with dividends reinvested. A Total Stock Market ETF (VTI) would be worth $3746 today with dividends reinvested.

https://www.portfoliovisualizer.com/...nalysisResults

[ownyourfuture]

Quote:

Originally Posted by Canned at 62 if you invested $1000 in T on January 1st, 2000 it would be worth $964 today with dividends reinvested. A Total Stock Market ETF (VTI) would be worth $3746 today with dividends reinvested.

Well that certainly silenced the bulls
But in fairness to them, it seems like most of them are either new to the stock, or are only considering buying.

[lucky penny]

Quote:

Originally Posted by Canned at 62 Yield is not the same as interest. If I own T (ATT) and have $1000 in shares and it has a 6% yield, the dividend is paid quarterly. The night before the dividend is paid the price of the share is adjusted down to the to the same as the dividend. If you reinvest the dividend you are equal. If you spend the dividend your account is now 6% less than before. https://www.portfoliovisualizer.com/...nalysisResults

Thanks for this. It's probably Finance 101 but it's an excellent reminder for someone (guilty!) who's been watching the stock since this post began & is smug about owning a few high-yield stocks.