AT&T (T) Stock Analysis
The AT&T dividend has been paid continuously since 1881 and increased for 36 consecutive years; qualifying the company as Dividend Aristocrat and Dividend Champion.
Current Dividend Annualized: $2.08
Note: AT&T announced on 5/17/21 it would merge WarnerMedia with Discovery and spin off the company. They also indicated they plan on reducing the AT&T dividend. This would lower the dividend yield substantially and cost the company it’s Dividend Aristocrat and Champion status.
AT&T (T) Intrinsic Value – Margin of Safety Analysis
(updated June 2021)
Earnings Per Share Normalized Diluted (TTM): $-0.75
Cash Flow From Operations (CFO) Per Share (TTM): $6.16
Free Cash Flow Per Share (TTM): $4.10
Estimated Intrinsic Value: $38
Target Buy Price Based on Required Margin of Safety = $27
(Required Margin of Safety Based On Risk Stability Grade:
A = 10%, B = 20%, C = 30%, D = 40%, F = 50%)
Target SELL Price Based on Estimated Intrinsic Value = $40
(Allow Overvaluation Adjusted by Risk Stability Grade:
A = 20%, B = 15%, C = 10%, D = 5%, F = 0%)
Risk / Stability Grade: D
A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.
B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.
C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.
D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.
F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.
Financial Risk Grade: D
A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.
B grade indicates a very low probability for a dividend cut.
C grade indicates a low probability for a dividend cut and/or average safety risk.
D grade indicates there are issues that should be considered concerning future dividend payments.
F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.
Earnings Quality Grade: C
A grade indicates earnings quality is high or far above average.
B grade indicates earnings quality is good and/or above average.
C grade indicates earnings quality is acceptable or average.
D grade indicates earnings quality is poor and requires thoughtful due diligence.
F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.
Earnings Report: 3/31/21
Dividend Value Builder Newsletter (24 Issues) - $99/Yr.
Discover, Evaluate, and Compare Dividend Stocks Without Emotional Bias
AAAMP Portfolios Position Disclosures:
Dividend Growth & Income – Long
Treasure Trove Twelve – Long
Global Dividend Balanced – None
Global Value – None
Global Value Aggressive – None
High Yield – None
Sector: Communication Services
Industry: Telecom Services
AT&T (T) is a diversified global leader in telecommunications, media and entertainment, and technology. Wireless communications remains AT&T’s largest business representing 40% of revenue.
AT&T Communications serves more that 100 million U.S Customers with entertainment and communications experiences across TV, mobile and broadband services. The consumer and entertainment segments includes the fixed-line and DirectTV (currently for sale) satellite televisions businesses, serving 20 million television and 14 million internet access customers.
WarnerMedia’s HBO, Turner and Warner Bros. are world leaders in creating premium content, operate the world’s largest TV and film studio, and own a world-class library of entertainment (20% of revenue).
The merger with TimeWarner (TWX) completed a vertical merger combining a content provider with a content supplier. AT&T is a completely different company than its history would indicate. 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.
AT&T has critical assets which provide scale and reach that is unmatched. Strong cash flow provides the company the ability to reinvest and build loyalty with it customers for the long term.
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. The Time-Warner merger increased AT&T’s debt to the point the company balance sheet has to be watched intensely.
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 paid a steep price for TimeWarner. AT&T’s cash flow expectations will have to be met or exceeded in order for the merger to be of value to shareholders. The high cost of competing in new technologies (i.e. 5G wireless spectrum) puts pressure on the company to spend it cash flow wisely.
Discover, Compare, and Evaluate Dividend Stocks Without Emotional Bias
Dividend Value Builder Newsletter (24 Issues) - $99/year.
Minimize Large Portfolio Drawdowns
Invest With Confidence In Less Time - Manage Your Portfolio Without Behavioral Errors
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.