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AT&T (T) Stock Analysis

by | Dividend Stock Analysis

AT&T Logo

AT&T Dividend

Current Dividend Annualized: $1.11

Note:  The AT&T dividend has been paid continuously since 1881. The company cut its dividend after the merger/spinoff of Warner Bros. Discovery. This leaves AT&T is a much better position; now able to focus on its core communication business, specifically 5G and fiber.

 

 

 

AT&T (T) Intrinsic Value – Margin of Safety Analysis

(updated November 2022) 

Earnings Per Share Normalized Diluted (TTM): $2.42
Free Cash Flow Per Share (TTM): $1.80
Cash Flow From Operations (CFO) Per Share (TTM): $4.53

Estimated Intrinsic Value: $25

Target Buy Price Based on Required Margin of Safety =  $18
(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 = $26
(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.

 

Business 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:  9/30/22

AAAMP Portfolios Position Disclosures:
Dividend Growth & Income – LONG
Treasure Trove Dividend – None 
Global Dividend Balanced – LONG
Global Value – LONG
Global Value Aggressive – LONG
Global High Yield – LONG

Company Description

Sector: Communication Services
Industry: Telecom Services

Wireless is AT&T’s largest business,contributing about 40% of revenue. The firm is the third- largest U.S. wireless carrier, connecting 66 million postpaid and 17 million prepaid phone customers.

The firm recently sold a 30% stake in its traditional television business, which serves 15 million customers and generates about 17% of sales. This business will be removed from AT&T’s financials going forward.

Fixed-line telecom services provided to businesses and consumers account for about 20% of revenue, serving about 15 million broadband customers.

SWOT Analysis

Strengths

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.

Weaknesses

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. 

Opportunities

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.

Threats

The high cost of competing in new technologies puts pressure on the company to spend it cash flow wisely. Advancing technology is commoditizing services and threatens to lower margins. 

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Disclaimer:
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.