After analyzing communication stocks from Monday's screen, I decided to purchase shares of AT&T (T).
Company Description
AT&T is the dominant local phone company in 22 states, serving about 55 million local phone lines and 15 million high-speed Internet users. The firm also provides phone and data services, such as Web hosting and data transport, to businesses nationwide, notably large corporations. AT&T owns 100% of AT&T Mobility, the second-largest U.S. wireless carrier with 77 million customers. The firm also owns a directory publishing business and a handful of international investments.
AT&T has been growing it's wireless revenue with help from iPhone and continues to roll out of U-verse fiber-based network which offers video and faster-speed broadband services. U-verse has higher profit margins and is increasing the companies profitability.
Strong Brand and Dividend Income
AT&T still has strong brand loyalty and an improved balance sheet. The 6% dividend yield is a big bonus as well. The dividend payout was 52% of the $13.9 billion of free cash flow which should provide ample cushion for continued dividend payments.
Disclosure: The Div Guy owns shares of T at the time of this post.
Great write up, but according to AT&T's latest earnings, they have ~50K switched access lines, 15.6 million wired broadband subscribers (17 billion if you include LaptopConnect Cards), and 81.6 million wireless subscribers. Take a look at http://www.att.com/Investor/Growth_Profile/download/master_Q3_09.pdf.
Rolf,
Not sure what you mean. Here are the highligts of the AT&T third-quarter results: Strong
wireless gains, further expansion of AT&T U-verse services and continued double-digit growth in revenues from advanced business products.
In your opinion, why do you think the dividend yield is so high?
Is it fear of losing the iPhone exclusivity deal? Or concern about all the debt on the books? Or something else?
I know they have great free cash flow right now, and they paid off about $4 billion in debt last quarter, but they're still carrying something like $72 billion in debt.
I'm ambivalent with AT&T - I don't own any shares currently, but I have written some short term puts against the stock and would be obligated to purchase below $25/share.
But I worry about the free cash flow levels in a rising interest environment when a company carries that much debt.
Hopefully they'll continue to aggressively pay down the debt.
Sorry, the T-giving holiday delayed me following up on this. I am just trying to correct a couple of the numbers in your posting. Take at the link I referenced earlier.
Rolf
Rolf,
Most of my data was from 2Q report and the info you referenced is from 3Q.
Brad,
I think the high yield is a result of lower stock prices. The stock is trading near 2003 prices after a big run up in 2007.
I am a little luke warm but I feel there is additional revenue to be made with their networks and a growth in wireless business. I see 2010 as a good year for telecoms. I may hedge my bets by purchasing some VZ as well. I think T can pay down debt and build out the Uverse business over the next couple of years.