S&P 500   4,577.11 (-1.84%)
DOW   35,368.47 (-1.51%)
QQQ   370.55 (-2.49%)
AAPL   169.80 (-1.89%)
MSFT   302.65 (-2.43%)
FB   318.15 (-4.14%)
GOOGL   2,719.96 (-2.50%)
AMZN   3,178.35 (-1.99%)
TSLA   1,030.51 (-1.82%)
NVDA   259.03 (-3.86%)
BABA   128.60 (-2.26%)
NIO   29.61 (-4.33%)
AMD   131.93 (-3.62%)
CGC   7.78 (-7.38%)
MU   92.87 (-4.61%)
GE   102.89 (-0.26%)
T   27.31 (+0.48%)
F   24.38 (-3.22%)
DIS   152.27 (+0.22%)
AMC   18.84 (-8.41%)
PFE   54.11 (-1.53%)
ACB   5.11 (-7.26%)
BA   225.01 (-0.42%)
S&P 500   4,577.11 (-1.84%)
DOW   35,368.47 (-1.51%)
QQQ   370.55 (-2.49%)
AAPL   169.80 (-1.89%)
MSFT   302.65 (-2.43%)
FB   318.15 (-4.14%)
GOOGL   2,719.96 (-2.50%)
AMZN   3,178.35 (-1.99%)
TSLA   1,030.51 (-1.82%)
NVDA   259.03 (-3.86%)
BABA   128.60 (-2.26%)
NIO   29.61 (-4.33%)
AMD   131.93 (-3.62%)
CGC   7.78 (-7.38%)
MU   92.87 (-4.61%)
GE   102.89 (-0.26%)
T   27.31 (+0.48%)
F   24.38 (-3.22%)
DIS   152.27 (+0.22%)
AMC   18.84 (-8.41%)
PFE   54.11 (-1.53%)
ACB   5.11 (-7.26%)
BA   225.01 (-0.42%)
S&P 500   4,577.11 (-1.84%)
DOW   35,368.47 (-1.51%)
QQQ   370.55 (-2.49%)
AAPL   169.80 (-1.89%)
MSFT   302.65 (-2.43%)
FB   318.15 (-4.14%)
GOOGL   2,719.96 (-2.50%)
AMZN   3,178.35 (-1.99%)
TSLA   1,030.51 (-1.82%)
NVDA   259.03 (-3.86%)
BABA   128.60 (-2.26%)
NIO   29.61 (-4.33%)
AMD   131.93 (-3.62%)
CGC   7.78 (-7.38%)
MU   92.87 (-4.61%)
GE   102.89 (-0.26%)
T   27.31 (+0.48%)
F   24.38 (-3.22%)
DIS   152.27 (+0.22%)
AMC   18.84 (-8.41%)
PFE   54.11 (-1.53%)
ACB   5.11 (-7.26%)
BA   225.01 (-0.42%)
S&P 500   4,577.11 (-1.84%)
DOW   35,368.47 (-1.51%)
QQQ   370.55 (-2.49%)
AAPL   169.80 (-1.89%)
MSFT   302.65 (-2.43%)
FB   318.15 (-4.14%)
GOOGL   2,719.96 (-2.50%)
AMZN   3,178.35 (-1.99%)
TSLA   1,030.51 (-1.82%)
NVDA   259.03 (-3.86%)
BABA   128.60 (-2.26%)
NIO   29.61 (-4.33%)
AMD   131.93 (-3.62%)
CGC   7.78 (-7.38%)
MU   92.87 (-4.61%)
GE   102.89 (-0.26%)
T   27.31 (+0.48%)
F   24.38 (-3.22%)
DIS   152.27 (+0.22%)
AMC   18.84 (-8.41%)
PFE   54.11 (-1.53%)
ACB   5.11 (-7.26%)
BA   225.01 (-0.42%)

AT&T May Offer Investors a Gift That Goes Beyond its Juicy Dividend

Thursday, December 23, 2021 | Chris Markoch
AT&T May Offer Investors a Gift That Goes Beyond its Juicy Dividend

Analysts are taking a more favorable view of T stock as the TimeWarner nears completion 

AT&T (NYSE:Tstock is enjoying its best week since early summer. T stock is up 6.5% since December 16. The reason for the optimism is stemming from two analysts' upgrades. In both cases, the stock was upgraded from Equal Weight to Overweight.   

On December 16, Morgan Stanley (NYSE:MS) upgraded AT&T. That was followed up by Barclay’s which also upgraded T stock on December 20. And even though Citigroup (NYSE:Creiterated its Hold rating on December 7, they acknowledged that the combination of WarnerMedia and Discovery (NASDAQ:DISCA). has the potential to double in value. They based their analysis on the strong free cash flow (FCF) being generated by the two companies.  

Is that enough to move AT&T stock higher? Maybe and maybe not. However, it may be enough to put a level of support on a stock that badly needs it. 

Questions Remain 

That doesn’t mean that T stock is screaming buy. Since hitting its 52-week high in May, T stock has dropped 27%. This is still a company that is offering more questions than answers.  

And by way of full disclosure, I felt that the stock’s brief spurt in July was akin to a dead cat bounce. However, I also cautioned investors that they may not want to hastily dispose of their AT&T shares. The reason is that, as I noted, the unknown is worse than the known. Essentially, I believed that once investors had a chance to process the WarnerMedia transaction, they may find that T stock was oversold.  

What About the Dividend? 

If you’ve held onto T stock through its recent turmoil, we have to tip our hat. It hasn’t been easy. And the only thing that has kept more income-oriented investors from heading for the exits is its dividend which, for the time being, remains one of the best available. 

That will change when the company completes its spin-off of WarnerMedia to Discovery. At that time AT&T will cut its dividend. That was the news that prompted many investors to hit the sell button.   

But this is where the story remains unclear. The reason is that current AT&T shareholders don’t know exactly how they will receive shares of the new company which will be called Warner Bros. Discovery (WBD).  

By this I mean that AT&T has not clarified whether the shares will be offered as a traditional spin-off or if current T shareholders would receive an exchange offer. In an exchange offer, current shareholders would receive WBD shares but only after they give up all or part of their existing AT&T shares. 

You can see how this can be confusing. Because while AT&T’s dividend will certainly be cut, it won’t be suspended. And that means that investors may not want to part with their shares.  

What About That Debt? 

Another concern that investors have had about AT&T is its massive debt which is approximately $150 billion that the company has to service with $7 billion in annual interest.  However, on this note a recent investor presentation seemed to allay concerns.  

AT&T will be generating $20 billion in post-interest FCF and they will be passing off approximately $50 billion in debt to WBD. And when you consider that AT&T consistently generates FCF at a level more than twice the rate of its debt payments.  

All of a sudden, AT&T’s debt looks more manageable. Of course that assumes the company doesn’t have other plans for all this cash.  

The Bottom Line on T Stock 

I’m left with the same though on AT&T that I had in July. That is, the company still has to regain the trust of its shareholders. And there need to be more answers forthcoming about exactly how current shareholders will receive shares of the new entity. 

But analyst upgrades are a positive first step. And as shareholders collect their dividend, they can look at AT&T’s consensus price target that currently is over $30 a share. That may be enough to make the stock a tentative buy for risk-tolerant investors.  

 


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
AT&T (T)2.9$27.31+0.5%7.62%227.60Hold$29.90
Compare These Stocks  Add These Stocks to My Watchlist 

Resources

Premium Research Tools

MarketBeat All Access subscribers can access stock screeners, the Idea Engine, data export tools, research reports, and other premium tools.

Discover All Access

Market Data and Calendars

Looking for new stock ideas? Want to see which stocks are moving? View our full suite of financial calendars and market data tables, all for free.

View Market Data

Investing Education and Resources

Receive a free world-class investing education from MarketBeat. Learn about financial terms, types of investments, trading strategies and more.

Financial Terms
Details Here
MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2022. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information | RSS Feeds

© 2022 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research.