AT&T( T ) - Get Reportis not known for its sharp volatility, but this stock could be shaping up as a quality buying opportunity.
On Thursday before the open, AT&T reported second-quarter non-GAAP earnings of 83 cents a share, which topped analysts' estimates by 4 cents.
Revenue of $40.95 billion fell 9% from a year earlier but was in line with expectations.
The company’s earnings report comes a day ahead of Verizon’s( VZ ) - Get Reportquarterly results.
A drop in WarnerMedia revenue — which fell 23% year-over-year — weighed on the company’s overall sales.
Free cash flow came in at an impressive $7.6 billion for the quarter. While that was down from a year earlier amid the coronavirus pandemic, it left AT&T with a dividend payout ratio of just 49% of free cash flow.
In other words, the company’s 6.9% dividend yield is relatively safe. That’s even as AT&T saw a net debt reduction of $2.3 billion in the most recent quarter.
While it may not sport robust growth, AT&T has a massive dividend at a time where fixed income is hard to come by.
As the 10-year Treasury bond yields just 0.58%, AT&T stock should be attractive to income-oriented investors. Trading AT&T Stock
At the same time, it may not be attractive to traders. This one’s a slow mover and while it’s trying to hold some key levels, no trend is in play just yet. Perhaps the earnings report will change that.
The stock is down about 1% on Thursday and it’s struggling to hold the 20-day and 50-day moving averages.
Ideally bulls will see these marks hold as support, while AT&T rotates back over the July high at $30.50 and uptrend support (blue line).
A close over the July high could put a gap-fill up toward $31.50 in play, followed by the June high near $32.50. Above that and the 200-day moving average is possible.
On the downside, look for a close below $29.50. That could put the June low in play at $28.43.
As much as bulls want to pound the table on AT&T’s valuation, dividend and the fact that shares were near $38 in January, remember that this stock was also sub-$26 in March.
It also has a lot of debt and is down slightly so far after earnings.
Respect the levels and let the stock tell you where it’s trying to go.