Top Picks 2018: AT&T (T)

01/22/2018 5:00 am EST

Focus: TELECOM

Shortly after Alexander Graham Bell invented the telephone he started AT&T (T), a conservative stock pick for 2018, notes Russ Kaplan in Frank, Fox & Hoagstrom’s Heartland Advisor.

It has been a vastly changing telecommunications world ever since, but AT&T has been up to the task. Changes have been in such areas as wireless and DirectTV.

With the proposed takeover of Time Warner, AT&T will be getting a good foothold in the entertainment industry and we think the chances of a takeover are good.

This takeover is part of an evolving trend that is transforming AT&T from a pure telephone company into a media company and media provides an opportunity for greater long-term profits.

AT&T is also a profitable company. With all of the changes in media, AT&T has a return on equity of 14.5%.

The stock is cheap at a recent price of around $38. It has traded as high as $43.9 per share and we believe that AT&T will surpass this level in the near future.

A major reason for this selection is AT&T’s exceptional yield of 5.26%. One thing a stock can do that a fixed income can’t is provide an increase in the dividend. AT&T has raised its dividend every year since 2001.

This is a tradition with the company and this increasing dividend will probably increase every year in the next several years. This makes AT&T an excellent choice for those investors who are interested in income.

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