Stock price when the opinion was issued
Improved since fall 2023. 6.5% dividend yield, attractive, pretty secure. Price broke above 200-day MA. With yields falling, dividend stocks are more appealing. Seems to have bottomed, as long as rates stay stable or continue to fall. Total return, though, is not tremendous. Cheap, but only 2% earnings growth expected, and he likes double-digits.
The wireline business is more difficult to build out and AT&T has a big presence in that area in the U.S He prefers Canada over the U.S. which is more competitive. He prefers BCE which already has a large wireline footprint and can bundle it with wireless. BCE raised its dividend by 3% a while ago and he has concerns over the payout ratio being more than 100%. However he thinks the dividend is sustainable.
Seeing resilience in the stock price right now. Fundamentals are hard to determine. Lots of mistakes in company management in the past. Pricing power not great. Could be a good dividend investment, but hard to justify when compared to other options in the markets. Overall, would not recommend investing.
Surprisingly is up 24% this year. Telcos are safe in a tough economy; they aren't cyclical and enjoy steady business (i.e. cell phones). Also, they pay pretty good dividends. That said, ATT was a value trap for record decades (high dividend, sinking stock price). But ATT has changed, no longer diversifying away from the phone business, but sticking with it. Last year, they sold their disastrous stake in DirecTV. Meanwhile, the wireless business has gotten less competitive, and so allowing them to raise prices to consumers. Last December's investor day projected 3% annual adjusted EBITDA growth, $18 billion free cash flow in 2027 to be paid in dividends (under 4%) and share buybacks. Their growth target in fibre broadband (they are market leader) is 45 million locations in the US by 2029 (3 million per year); these investments generate higher revenue per user. The buildout is expensive though, but ATT expects margin expansion out of it. The company is confident that Washington will give them tax incentives again. It's no longer a value trap.