AT&T is the Ultimate Dividend Stock Right Now

A deep-dive into the fundamentals behind AT&T stock

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AT&T Inc. (NYSE:T) is a U.S.-based telecommunications conglomerate with operations in multiple countries. The company has over a century of history. It's also the parent company of other major corporations including WarnerMedia and DirecTV. At the beginning of 2020, T stock traded near its 52-week high of $39.70, but T stock is currently down about 30% year-to-date. T stock remains near its 52-week low of $26.08 since its decline in March. AT&T is slated to deliver earnings before-the-open on Thursday, October 22 and the company will be looking to push T stock back up to its pre-pandemic highs.

AT&T has a market cap of $197.72 billion and a book value of $24.69 per share. Its price-to-book (PB) ratio stands at 1.15. The company has a trailing price-earning (P/E) ratio of 17.27, and a forward P/E ratio of 8.86. The company's trailing 12-month P/E ratio is 16.92.

AT&T has beat expectations in three of its last four earnings reports.  In the most recent quarter, AT&T beat expectations by $0.04. The company reported an earnings per share (EPS) of $0.83, just beating out the expected $0.79. On October 22, AT&T is expected to report an EPS of $0.76. continuing the downward earnings spiral the company has been experiencing recently. If AT&T reports the expected EPS of $0.76 for the third quarter, it would represent an $0.18 decrease year-over-year, as AT&T reported an EPS of $0.94 in the third quarter of 2019. In the first quarter of 2020, AT&T missed earning by just $0.01. The company has a trailing 12-month EPS of $1.64.

AT&T grew its revenue more than $10 billion between 2017 and 2019. In 2020, AT&T has experienced a decrease in revenue. First quarter earnings alone decreased by $4 billion, and another $2 billion in the second quarter of this year. The company’s net income growth has been largely inconsistent over last 4 years. Nonetheless, AT&T has maintained their annual net income above the $10 billion on a reasonably consistent bases. In 2017 and 2018, the company produced net income of $29.45 billion and $19.37 billion, respectively.

AT&T currently has $17 billion in cash and $196.22 billion in total debt. The company’s balance sheet holds $547.9 billion in total assets and $354.45 billion in total liabilities. AT&T's total equity stands at $1.54 billion. The company has paid its investors dividends consistently since 1984, and have consistently grown their dividend since 1999. AT&T last paid a dividend of $0.52 per share. The $2.08 annual dividend AT&T pays comes in at a dividend yield of 7.39%.

At this point, AT&T doesn’t have much room to grow revenue-wise, but it does have room to increase its stock price. T stock currently trades at a price that is only $3.06 lower than its book value. The recent dip will be a huge opportunity for dividend investors to pick up the stock at a discounted price.

Furthermore, as one would have been expect from a massive and consolidated company like AT&T, the company has maintained its high-yield dividend during the ongoing worldwide pandemic. The company could continue raising its dividend for years to come, too. T stock has an opportunity to see decent price appreciation as the stock slowly climbs back to a more justifiable valuation. Overall, it's natural to feel that AT&T seems to be too big to fail. The biggest potential risk for investors will that AT&T gets broken up due to monopoly-like practices. Aside from that, AT&T is a clear winner for dividend investors.

 

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