Jay Soloff, who is presenting at MoneyShow Orlando Feb. 7-8, describes a strategy earn significant p...
AT&T: Top-Yielding Dividend Aristocrat
06/27/2017 2:54 am EST
AT&T (T) is currently the only Dividend Aristocrat with a yield of 5%; this gives the stock a unique combination of income and safety, asserts Ben Reynolds, income expert and editor of Sure Dividend Retirement Newsletter.
AT&T, the largest domestic telecom company in the United States, can trace its roots back to 1876 when Alexander Graham Bell invented the telephone.
Today, AT&T generates more revenue than any other communications company and employs more than 200,000 individuals in the U.S. alone. AT&T is highly shareholder-friendly and has increased its dividend payments for 33 consecutive years.
AT&T’s pending $85 billion acquisition of Time Warner (TWX) announced last fall continues to proceed as planned. The transaction is expected to be closed by the end of 2017.
AT&T is likely the single safest stock available today with a yield above 5% — the company has a payout ratio in the most recent quarter of 87.5% and 66.2% using GAAP and adjusted earnings, respectively.
AT&T’s long dividend history shows it is capable and willing to raise dividends through a variety of environments. AT&T has very stable cash flows, and its services are a necessity in today’s connected world. This gives AT&T a utility-like business model with substantial barriers to entry.
AT&T’s earnings-per-share have grown at 2.0% a year over the last decade, and its dividend payments
have grown at 3.7% per year over the same period. I expect similar levels of growth going forward.
Growth in the short-term will come from an expected $1 billion in annual synergies from the pending Time Warner acquisition, while long-term growth will come from increasing consumer demand for telecom services. AT&T is likely to deliver inflation-beating dividend growth.
The company’s stock remains firmly in ‘buy’ territory, currently trading at 13.6x 2016’s earnings and 13.1x 2017’s expected earnings (using adjusted earnings — the GAAP equivalent is 18.3x 2016’s earnings).
For context, the company’s average price-to-earnings ratio over the past decade is 14.8. Right now is historically a great opportunity to initiate or add to a position in AT&T.
Related Articles on STOCKS
Chinese economic stimulus efforts, U.S. to hold to Iranian oil sanctions and Mexican supply disrupti...
Arista Networks (ANET) is bringing networking into the age of the cloud. Cloud networking brings eff...
Cardinal Health (CAH) is one of 3 large pharmaceutical distributors in the United States that togeth...