Ma Bell: Telecom & Media

04/29/2020 5:00 am EST


Gordon Pape

Editor and Publisher, The Income Investor and the Internet Wealth Builder

AT&T (T) is a U.S.-based telecom company. It is the second largest provider of mobile services and the largest provider of fixed telephone services in the U.S., notes Gordon Pape, growth and income expert and editor of Internet Wealth Builder.

It also provides pay-TV services through DirecTV. The recent acquisition of Time Warner (now called WarnerMedia) made AT&T a major content provider as well.

The bad news is the company released first quarter results that came in below expectations for both revenue and profits. The company also withdrew guidance for the rest of the year, citing the “lack of visibility” relating to the COVID-19 pandemic.

The good news is that AT&T expects to provide cash from operations to support investments in growth areas, dividend payments, and debt retirement. First-quarter revenue totaled $42.8 billion versus $44.8 billion in the same period last year.

Growth in domestic wireless service revenues and strategic and managed business services revenues partially offset declines in revenues from WarnerMedia, domestic video, legacy wireline services, domestic wireless equipment, and Vrio. (Vrio is the holding company for AT&T’s Latin American entertainment operation.)

Adjusted earnings per share in the quarter came in at $0.84 compared to $0.86 the year before. The company did not adjust for COVID-19 costs of about $0.05 per share in the quarter, with more than half of those costs expected to have only short-term impacts.

The stock pays a quarterly dividend of $0.52 a share ($2.08 a year) to yield 7%. Based on the CEO’s comments, the payout looks safe.  AT&T looks poised to weather the storm with relatively minimal damage. The company’s solidity and the high yield make it a very desirable stock to own at this time. We rate the stock a "buy".

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