ATT Inc.: T Stock Is a Boring Investment That Brings Excitement
December 27, 2016
T Stock Continues to Reward Shareholders
AT&T Inc. (NYSE:T) stock could be both an exciting and a boring investment opportunity.
The exciting part for T stock is its products, which include the latest phones to hit the market. These phones are made by the major players in the industry, such as Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOGL).
The boring part for T stock would be the investment as a whole. AT&T pays a dividend on a quarterly basis, with a current value of $0.49 per share. The shares are trading at $42.72, which is offering a yield of 4.59%.
The dividend exists because T stock operates in the telecommunications sector. The industry is known for having large up-front costs to join, but minimal costs outside of infrastructure maintenance fees. This can be seen in the earnings payout ratio of 68%. So while T stock may be considered a boring investment, there’s nothing boring about receiving a dividend.
With the business being low-cost following its launch, shareholders have been able to receive an increasing dividend payment. The dividend increased every year since 1985–that’s 31 years!
For AT&T to continue its streak of paying an increasing dividend, revenue needs to increase as well. And on that front, so far so good, as revenue has increased 15% over the past five years. This supports the idea of more dividend hikes in the future.
As an investor, one likely concern is the company outlook when it comes to its competition. However, AT&T is part of an oligopoly, meaning only a few companies operate in its market, with a larger share held by each of those few companies. Again, this is due to the large startup cost that is required to start a business in this segment.
Another reason why T stock would be considered boring is because there is not a lot of volatility of the price movement. This is a positive because when the market does have a huge movement downwards, the invested capital should be preserved. This price movement is measured by the beta of the stock, which is 0.39 for AT&T. What this number means is that if the market fell by one percent, then T stock should fall by 0.39% on average.
More information regarding why investors should take notice of AT&T can be found in the the price-to-earnings ratio. T stock’s current ratio is 18.15 times, trading at a 30% discount when compared to the broad-based S&P 500.
Final Thoughts On T Stock
AT&T is one of the largest telecom companies in the U.S., with over 133.3 million customers. And with a large customer base comes no need to worry about continued cash flow.
Long-term investors willing to be patient may want to consider owning this stock. AT&T has proven friendly to shareholders over its long history of providing rewards.
