Tuesday, August 16, 2011

A Stock With A 6% Yield

While there are a lot of good yielders in the market right now, there is one company that has a yield that is simply too good to pass up. The recent market drop has bought AT&T back into the spotlight. There are a number of reasons why AT&T is so attractive. AT&T is one of the best yielders in the market. The company is one of the biggest players in the telecommunications industry. This is an industry that includes rivals Verizon and Sprint. AT&T is trying to increase its size by gobbling up the operations of T-Mobile. This merger will still require approval by the federal government.

AT&T has been aggressively expanding its businesses with acquisitions. There is the pending deal for T-Mobile and the $1.9 billion dollar purchase of Qualcomm’s Spectrum company. AT&T is trying to increase its subscriber base and wireless service offerings with the purchases. They are seen as key components of the company’s future growth plans.

AT&T is a cash flow giant with $36 billion dollars in operating cash flow. The company has a cash flow rate of just shy of 70%. AT&T’s primary concern is its massive debt load. The company just retired some near term debt by issuing more long term debt. It would be nice to see the company start to pay down its long term debt obligations. Despite’s these challenges AT&T’s stock is a solid one for income seekers.

The company’s dividend is the highest yielder in telecommunications. Compare AT&T’s dividend yield to that of its competitors. The company currently has a 6.1% yield is far more attractive than almost any other large cap stock in the industry. Verizon has a similar yield to AT&T at 5.7%. Sprint pays no dividend whatsoever and has a bunch of problems of its own.

AT&T is currently trading at $28 a share. Shares are not less than 10% from the 52 week low of $26.20 per share. That is only 1.4 times the current book value of $19.18 per share. The current payout is 60% of this year’s earnings estimates. AT&T has a long term history of increasing its dividend having raised its dividends for 28 straight years.


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