AT&T Rewards Shareholders With 6.2% Dividend Yield (T)
By: Ned Piplovic,
Though some of AT&T’s yield growth can be attributed to rising dividend income, it came about mainly as a result of the company’s stock price decline since mid-2016, the beginning of which coincides almost exactly with AT&T’s quest to acquire Warner Brothers. This process turned into a two-year battle with the Justice Department, and it was only on June 12 of this year that a federal judge ruled AT&T could proceed with the acquisition. Apparently, the Justice Department could not prove that “the telecom company’s acquisition of Time Warner would lead to fewer choices for consumers and higher prices for television and internet services.”
With the ability to access the entire portfolio of Time Warner’s content — which includes all HBO and CNN programming, as well as well-known film franchises like Harry Potter, The Matrix and Lethal Weapon — AT&T now has an opportunity to significantly grow its direct-to-Customer (D2C) streaming services. These services could offer direct competition to Netflix (NASDAQ: NFLX) and Amazon’s (NASDAQ:AMZN) Prime Video service. Additionally, the company is placing an emphasis on expanding its 5G wireless network capacity in order to accommodate the projected growth of 4K resolution and virtual reality streaming.
Should these investments into content and distribution capacity pay off, and should AT&T succeed in seizing a significant share of the content streaming market, investors could have a good opportunity to take a long position in the company at a discounted price. Alternatively, investors may want to take advantage of the high dividend yield and start collecting extra income immediately, regardless of the risk of further decline. The company’s next dividend distribution will occur on August 1, 2018, so interested investors will need to take a position prior to the ex-dividend date on July 9, 2018 in order to be eligible
AT&T, Inc. (NYSE:T)
Based in Dallas Texas and founded in 1983, AT&T Inc. provides communications and digital entertainment services through four distinct business units. The AT&T Communications unit currently generates almost 80% of the company’s revenue and provides mobile, broadband, video and other communications services in the United States. The newly acquired WarnerMedia unit consists of HBO, Turner and Warner Brothers media content and assets. Additionally, AT&T International provides mobile services in Mexico, as well as pay-TV service across 11 countries in South America and the Caribbean. Lastly, AT&T’s yet-to-be-named advertising & analytics business unit provides marketers with advanced advertising solutions using valuable customer insights from AT&T’s TV, mobile and broadband services, combined with extensive advertising inventory from Turner’s cable networks and AT&T’s pay-TV services.
AT&T belongs to a select group of only 53 companies designated Dividend Aristocrats. To receive this prestigious designation, a company needs to be part of the S&P 500 Index, possess a market capitalization in excess of $3 billion, and have at least a 25 consecutive year record of annual dividend payments
Over the last decade, AT&T has been boosting its quarterly dividend amount by $0.01 for the first quarter of every calendar year. Over the past two decades, the company has enhanced its annual dividend amount more than two-fold, which corresponds to an average annual growth rate of nearly 4% per year.
AT&T’s current $0.50 quarterly distribution is 2% higher than the $0.49 payout from this time last year and amounts to $2 on an annual basis. The equivalent 6.2% forward dividend yield is almost 20% higher than the 5.2% yield over the past five years. Compared to the 1.1% average dividend yield of the entire Technology sector and the 2.65% yield of the Domestic Telecom Services industry, AT&T’s yield is 450% and 135% higher, respectively.
The company’s share price experienced several swings of 10-15% over the past 12 months. During one of those upswings, the share price peaked at $39.51 on October 5, 2017. After a few additional swings, the share price reached its 52-week low of $31.40 on May 9, 2018. Over the next two months, A&T’s share gained 2.6% to close on July 2 at $32.21. However, this closing price was still more than 18% below the October 2017 peak.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.