在过去三个月里，AT&T的股价上涨了13%，受益于电信公司几乎完成了其不幸的娱乐业务退出的消息。周四，花旗集团(C.N)分析师重申了对该公司的“买入”评级，再次给予AT&T信心，将其称为“顶级推荐股票”。Although AT&T has lost its former title as a dividend aristocrat, its stable business and 5.2% dividend yield still make it very attractive in the eyes of investors.
$AT&T (T.US)$ Not a growth stock, but its income growth is slow and steady.
AT&T was once a darling of dividend investors, but lost its shine after cutting dividends in 2022. Perhaps it's time to give it a second chance.
In the past three months, AT&T's stock price has risen by 13%, benefiting from the news that the telecommunications company has almost completed its unfortunate entertainment business exit. On Thursday, Citigroup (C.N) analyst reiterated a "buy" rating on the company, once again giving confidence to AT&T, calling it a "top recommended stock".
Although AT&T's stock price may continue to rise, investors may be more inclined to consider this stock simply because of its dividends. According to FactSet data, before the stock price soared this summer, the stock had a dividend yield of nearly 6%, which is currently at 5.2%. With falling interest rates, this becomes even more attractive.
AT&T was once considered a "dividend aristocrat", continuously increasing dividends to investors over the past 25 years. However, this record ended in 2022 when the company, laden with debt, decided to divest its WarnerMedia business to focus on its core wireless and wireline phone business.
In the previous year, AT&T sold a 30% stake in its other major entertainment asset, satellite television DirecTV, to private equity firm TPG. AT&T announced last month that it will sell its remaining stake for $7.6 billion in cash over the next five years.
Despite these painful transactions, they should help AT&T focus on its core business of providing mobile and broadband internet services to American consumers. According to FactSet's data, analysts predict slow but steady revenue growth in the future—0.1% in 2024 and 1.6% in 2025.
However, AT&T is not a growth stock. DirecTV's cash flow should also provide additional support for AT&T's dividends. Although the company's debt still exceeds $126 billion, management has indicated that the company is expected to reduce its debt level to 2.5 times adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the mid-2025.
According to Morningstar's data, AT&T's reduced dividend is currently around $8 billion per year, lower than the $15 billion before 2021. The new, smaller dividend only accounts for 50% of free cash flow in 2023, compared to 80% before the reduction. These numbers may continue to improve after AT&T's latest actions.
As the Fed lowers short-term interest rates, AT&T's 5.2% yield becomes increasingly attractive. This summer, the one-year Treasury bond yield was briefly above 5%, but has recently fallen to 4.2%. Yields on other savings instruments are also starting to decline.
Despite being a telecommunications competitor of AT&T,$Verizon (VZ.US)$offering a 6% attractive yield, AT&T's dividend still outperforms some popular dividend funds. The iShares Select Dividend ETF has a yield of only 3.7%. The ProShares S&P 500 Dividend Aristocrats ETF has an even lower yield, only 2%.
Of course, compared to the strong performers in dividend aristocrat funds (such as$Exxon Mobil (XOM.US)$（3.1%）、$Walmart (WMT.US)$Unlike Apple (1%) and IBM (2.8%), AT&T can no longer claim a decades-long track record of reliability. However, with streamlined business and more cash/money market, many investors may consider it worth the risk.
Editor/Rocky
