Archive for February, 2016

AT&T ($T) – Stock Pick for 2/2/16


Since early 2009, AT&T has been a solid performer, gaining 35% in share price during the period. They have a solid dividend, currently paying out $1.92 a share per year which is good for a yield at 5.32%. Looking at the point and figure chart below, you can see the trend.

ATT triple top

Out of the last four quarters they have beaten the Wall Street expectations for earnings in all but the last one. In that one they only met expectations which was a bit of a letdown after the previous three. The Street had expected better numbers because they thought the acquisition of DirecTV would have driven gains. The competition in the wireless subscriber front probably tempered those results.

They are in solid shape financially. Looking at their most recent statements, their revenue is up by over 18% from the prior year. The operating margin is 11%, while operational cash flow is in excess of $32 billion.

The current company debt is a bit higher than you’d like to see, but it is manageable. They just recently sold $6 billion in bonds to restructure their debt. Their current debt-to-equity ratio is 106%. Usually you want to see it below 100% if you invest more conservatively, but it’s not a troublesome amount for a company like AT&T.

In growth opportunities, AT&T looks to expand their GigaPower offerings to compete with the roll out of Google Fiber in cities across the country.

They are now selling DirecTV in their stores and were able to add 214k subscribers in their first full quarter since the acquisition.

They are getting more involved in the Internet of Things space. They reported that they connect 26.2 million devices globally, of which 1.2 million were added in this past quarter. They are pushing relationships with car makers to add 4G LTE in their vehicles. In a recent deal with Ford, they plan on adding it to 10 million of their vehicles over the next 5 years.

With various new revenue streams for them and solid year over year growth, I think you can’t go wrong with purchasing some AT&T for your portfolio. Even if the overall market isn’t the best right now, you have to pick and choose your spots and I think this is one spot you can live with. So this is my stock pick recommendation for today.