This Huge Telecom Has One of the Highest Yields of Any Stock

Telecom & Wireless

Published: December 15, 2020 9:48 am

Leave aside that huge American telecom AT&T Inc. (NYSE: T) has been badly run recently and its stock has sold off this year. It remains one of the county’s largest companies and has a dividend that produces a yield of 6.81%. There is no public corporation of AT&T’s size that comes even close to this figure.

AT&T’s shares are off 21% this year, while the S&P 500 is almost 13% higher. Going further back, AT&T’s shares are just above flat over the past two years, while the index is up 41%. An investment in AT&T made two years ago is among the worst in any company with annual revenue of over $100 billion a year.

In the most recent quarter, AT&T’s revenue fell 5% to $42.3 billion from the same quarter a year ago. AT&T’s wireless revenue, its most important business, was flat at $13.9 billion. AT&T is likely to be vexed in this business by aggressive promotions from rivals Verizon and T-Mobile. As superfast 5G service rolls out, there will be extreme efforts by each to steal the other’s customers.

WarnerMedia, the offspring of AT&T’s buyout of Time Warner, posted a revenue drop from $8.4 billion in the year-ago period to $7.5 billion. The unit made a radical move recently as it said it would release all Warner Bros. movies in 2021 onto its HBO Max streaming platform at the same time they go into theaters. This is unlikely to help it make inroads against much larger streaming rivals Netflix, Amazon and Disney. The market is simply too crowded.

AT&T’s Entertainment Group, which includes AT&T TV and AT&T Fiber, posted a revenue drop from $11.2 billion to $10.1 billion.

Investors might reasonably ask whether the AT&T dividend is safe as the company struggles to find solid footing for its revenue. At this point, based on the balance sheet and cash flow, there is little threat. That is good news to the extent that investing in AT&T in the hope of a sharp recovery in its stock is risky.