AT&T (T) Stock Analysis
The AT&T dividend has been paid continuously since 1881 and increased for 34 consecutive years; qualifying the company as Dividend Aristocrat and Dividend Champion.
Dividend Yield: 5.4%
Current Dividend: $2.00
Free Cash Flow From Operations (CFO) Per Share (ttm): $6.33
Free Cash Flow Per Share (ttm): $2.85
Market Capitalization: $225 B
Enterprise Value: $339 B
Dividend Analyzer Checklist
(updated January 2018)
Dividend Safety Score (14/33 points)
Dividend Payout Ratio (ttm): 93%
Cash Dividend Payout Ratio: 73% (5/12 points)
Net Financial Debt: $117788 M
Total Assets: $443865 M
Net Financial Debt / Total Assets: 27% (5/12 points)
Net Financial Debt to EBITDA (ttm): 284%
Piotroski Score (1-9) (TTM): (4/9 points)
Profitability & Growth Score (20/33 points)
Operating Earnings Yield (ttm): 10.9% (14/15 points)
Net Income (ttm): $12850 M
Gross Profit (ttm): $84545 M
Total Assets: $443865M
Gross Profitability Ratio = GP / Total Assets: 19% (6/18 points)
Cash Return On Invested Capital (CROIC)(tttm): 6%
Return on Invested Capital (ROIC): 5%
Valuation Score (30/34 points)
Free Cash Flow Yield (ttm): 7.2% (15/17 points)
EV to EBIT (ttm): 13.6
EV to EBITDA (ttm): 6.9 (15/17points)
Price to Sales Ratio (ttm): 1.5
Price to Book Value (ttm): 1.9
Price to Earnings Ratio (P/E) (ttm): 19
PE 10: 19
TOTAL POINTS – (64/100) (50 is an average score)
Earnings Report: 10/24/17
Next Earnings Report: 1/25/18
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Rankings & Recommendations
(updated January 2018)
AT&T (T) is ranked #51 (out of 371) overall and #1 (out of 6) in the Communications Sector by the Dividend Analyzer.
T is a great addition to any large diversified portfolio. However, it should be viewed differently than in the past. I’m afraid the long term risk of a dividend cut is higher than most investors perceive. In other words, its dividend safety should not be viewed equal to the average Dividend Aristocrat. Post merger AT&T (if the Time Warner deal is completed) will have be an even more leveraged company. Only time will tell whether the debt adds or subtracts value.
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Should Be Considered
Looking For Exposure to Communications Sector / Should Be Considered
Deep Value Investors / Should Be Considered
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Sector: Communication Services
Industry: Telecom Services
AT&T provides wireless and wireline telecommunication services. The company operates in the United States and Mexico to connect people and content with “advanced mobile service, next-generation TV, high-speed Internet services and smart solutions for business”.
Recent acquisitions have made AT&T a company with great promise and a riskier profile. The purchase of DIRECTV made AT&T the worlds largest pay TV provider stretching from the United States into Mexico and 10 other Latin American countries.
Add in the acquisitions of two Mexican wireless providers (Lusacell and Nextel Mexico) and you have a company that is expanding its reach and its balance sheet.
The proposed merger with TimeWarner (TWX) has faced mixed reviews from both regulators and the investment community. This would be a vertical merger combining a content provider with a content supplier.
AT&T has to be analyzed a little differently than most companies in the Arbor database. It’s closer to a utility because it operates in an oligopolistic industry. In other words, there are few sellers giving those limited companies in the sector advantages in scale, pricing, bargaining power, etc.
The incredible amount of capital expenditures required to be in this industry keeps competitors away but debt high. So it’s a two edged sword.
Recent acquisitions only add to AT&T’s economic moat. Billions of dollars in capital expenditures (over 100 billion the last 5 years) make it almost impossible for new competition. The Direct TV acquisition is proving to be successful and broadening the reach and depth of AT&T services.
Lots of debt. This company is really leveraged. This can be a big benefit if conditions are favorable or a huge problem if conditions were to deteriorate.
AT&T has invested billions in acquisitions and spectrum. These investments can provide large benefits including increased revenues & profits, a larger market share, increased ability to bundle services, and substantial synergies that enable cost cutting.
The company believes its merger with TimeWarner will allow it to meet consumer demands for video innovation and premium content. Having one of the world’s largest content creators combined with AT&T’s services could be powerful.
AT&T’s entry into new foreign markets adds risks that haven’t been part of the mix (foreign governments, competition, a strengthening dollar). Government regulations are always a threat.
The company is paying a steep price for TimeWarner. AT&T’s expectations will have to be met or exceeded in order for the proposed merger to be of value to current shareholders.