AT&T an undervalued high yield share for the income investor

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AT&T an undervalued high yield share for the income investor

Published Date: 2018-04-19 | Source: Share Picks USA | Author: Bruce Ingram | Comments

AT&T an undervalued high yield share for the income investor

AT&T is the worlds largest telecoms company. The company has been in existence since 1875.

The company provides fixed and mobile telephone services, data and internet services as well as pay-TV.

The company operates distinct business units: The following is an extract from their website

Business Solutions makes up 43% of sales, Entertainment 31%, Consumer Mobility 20% and International operations 4%

AT&T is the second largest wireless solution provider in the US. It has strong brand recognition and a large subscriber base. Due to high cost to entry, and limited availability of Radio Frequency spectrum, the company has a good competitive advantage.

AT&T has aggressively diversified its operations in recent years with the acquisition of DirectTV the largest Pay TV company in the world. They are also in the process of trying to acquire Time Warner

Although the dividend growth is slow at 2% a year for the last 5 years, the current dividend yield is a healthy 5.61%.

The company had an income of $160.5 billion in 2017 and has had 34 years of paying increasing dividends. 65% of income is paid out as a dividend. This is a safe payout ratio for a telecoms company. Analysts expect the 2% growth to continue for the foreseeable future. The current dividend yield is 8% above the 5 year average indicating the company is slightly undervalued.

Analysts forecast that the company has the potential to grow at an annualized ROR of nearly 17% to the end of 2020. This forecast includes capital growth and dividend income.

The S&P credit rating is BBB+ Total assets of $440 billion

Some of the risks in investing in AT&T are:

  • Slow growth
  • Poor integration of Time Warner if the deal goes through

The company profile and investor information website can be found here: https://about.att.com/sites/company_profile

With the solid and high dividend yield and total potential annual return over the next 2 to 3 years of 16%. I believe AT&T (T) is a good buy for the income investor.


Disclaimer: Please note that I am not a Registered Financial Planner. The articles I write are based on my own personal research and for my own use and is not to be construed as financial planning advice. At all times readers are urged to exercise caution when investing in any financial instruments, to do their own research


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