Thursday, November 13, 2014

AT&T (T) 2014 Review

AT&T is one of the world’s largest telecommunications companies.  The company has grown its dividend at a 5% pace over the past ten years (profits have been flat) earning approximately 10-15% return on equity.  T went through a rough period (2008-2011) as the growth of its traditional wireline business slowed and margins came under pressure.  Looking forward profits should regain momentum as a result of:

(1)    synergies from Leap Wireless acquisition,

(2)   competitive advantage from having the best Internet speeds in industry,

(3)   new product [service] innovations,

(4)  acquisitions,

(5) share repurchases.

 Negatives:

(1)  competition from Voice over Internet and cable offerings,

(2) spectrum crunch in wireless market,

(3) aggressive pricing by competition,

(4) highly regulated industry.

T is rated A++ by Value Line, carries a 41% debt to equity ratio and its stock yields 5.4%.

  Statistical Summary

                 Stock      Dividend         Payout      # Increases  
               Yield      Growth Rate     Ratio        Since 2004

T                5.4%           4%               67               10
Ind Ave      3.6              5*                61              NA 

                Debt/                        EPS Down       Net        Value Line
                Equity         ROE      Since 2004      Margin       Rating

T               41%            15%             3                11%           A++
Ind Ave     44               11              NA                8              NA

*many companies in T industry do not pay a dividend

       Chart

            Note: T stock made good progress off its March 2009 low, quickly surpassing the downtrend off its May 2008 high (straight redline) and the November 2008 trading high (green line).  Long term, it is in an uptrend (blue lines).  Intermediate term, it is in an uptrend (purple lines).   Short term, it is in a trading range (brown lines).  The wiggly red line is the 50 day moving average.  The High Yield Portfolio owns a 75% position in T.  The upper boundary of its Buy Value Range is $30; the lower boundary of its Sell Half Range is $45.

  
  
11/14

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