Dividend Increase: AT&T (T) 2018

AT&T has announced its 2018 dividend increase of $0.01 for the year, bringing the quarterly dividend to $0.50 from last years $0.49.  This represents a 2.04% increase to the dividend.

Based on the new quarterly dividend and a 12/22 closing price of $38.94, this brings the dividend yield for T to 5.14%.

The 1 cent increase falls exactly inline with my expectations for the year.

Lets take a look at the dividend history:

AT&T has a 34 year streak of increasing its dividend.  Here we look at 2005 -2018 and see that the average increase has been 3.47% per year, nothing mind blowing.  It’s a low growth industry, so any expectation beyond 1 cent a year is unrealistic.  If/when the merger with TWX goes through, the content library may allow for better growth down the road, if AT&T is able to monetize it properly.

T vs S&P500

No surprise here. T has been stuck in a multi year trading range of 35-40.  It’s basically a pure dividend play, which is part of the reason the company is looking to purchase TWX, to get some capital appreciation behind it.  The S&P500 is destroying AT&T going back 10 years.

T Key Stats:

Market Cap: $239 Billion

Beta: 0.53

PE Ratio: 18.72

Dividend Yield: 5.14%

Payout Ratio: 93.78%

Profit Margin: 8%

Total Cash: 49 Billion

Total Debt: 165.12 Billion

Payout ratio is rather high, but company kicks out nice cash flows and has a decent amount of cash in the bank. Super thin profit margins.

Conclusion

I don’t think I’ll be long as much T.  If the stock gets closer to $40, I’ll be shorting some calls against the stock, collecting the premium and any dividends before possibly getting exercised against.  The company needs the TWX acquisition to go through but will face some significant headwinds with the government.  That purchase give AT&T the ability to add streaming to it service and possibly monetize the Time Warner content with a monthly subscription service.  I’m kind of growing impatient in waiting for the stock to break out of its multi year trading range.

 

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