Sunday, January 16, 2011

AT&T Stock Analysis

AT&T (T) has paid dividends for 26 years.  They have had at least 5 years of consecutive dividend increases and are a truly ruler in their area of the technology sector.

Their price: as of January 16th 2011 they are trading at $28.43. Their 52 week high is $30.10, giving a 5.55% appreciation on the pricing giving its most recent high. Their low is $23.78 over the prior 52 weeks. Therefore, it is close to the 52 week high.  I usually like to buy further away than that 52 week high, simply because I am cheap : ), but then again my preferences can be completely different than yours.  

Price to Earnings Ratio: AT&T has a current 8 P/E ratio (According to Google Finance), well below the S&P average and according to Morning star is far below the 15.8 P/E for the industry average. Therefore, AT&T's stock is relatively cheap to its earnings and is currently undervalued against the average of both the industry and S&P index.

Dividend Yield: Of course I am bringing up their dividend yield currently.  Their current dividend yield when trading at $28.43 is 6.05%.  Wow.  Pretty high if you ask me.  Most telecommunication stocks, however, do have high yields, therefore, this isn't unusual for this industry.  Also, their dividend yield growth rate is just over 5% according to my analysis since 1984.   That isn't as high as I typically like to see it, however the yield is high and increasing what they pay out by 5% every year still isn't too shabby : ) 

Payout Ratio: Their dividend is $1.72 per year and their EPS is $3.55. Therefore, 1.72/3.55 = 48.45%, right in the middle of where I like it (Between 40 and 60%)!!  This gives a great big thumbs up in my book as a close to 50% payout ratio tells me that basically they keep half of their earnings for growth or other means of action and they give half of them back to their investors!

Conclusion: AT&T is a great stock to add to your portfolio.  Given it's current price, I would like to see it maybe 50 cents to a dollar cheaper, as I think Verizon's deal with Apple for the iPhone could hinder AT&T's performance for the future.  However, one has to realize AT&T's total business - Internet, U-Verse (TV), Direct TV, Home Phone Lines, Business Lines, Mobile Devices, Publications etc., etc.  Therefore, they have different cash flow vehicles in their portfolio rather than just their mobile branch.  They have been around for a very long time period and I believe will be for the future.  

-Lanny B.

Disclosure: I do not hold nor recommend anything. This is actual data, analysis, however I base no investor recommendation. However, I personally would add/start a position on this firm, however my direction is different from anyone else's. Thank you for your understanding.

1 comment:

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