AT&T Inc. (NYSE: T) is among America’s oldest big companies. It was founded in 1885. People often forget it was broken into pieces in the 1980s due to an antitrust case. Those pieces mostly have been reassembled into AT&T today. Importantly, as part of its transformation, AT&T also has gone from a landline company to one that relies on wireless revenue more than any other business. Because of an iron-clad balance sheet, a high dividend and the moat around its wireless operations, AT&T is the best stock investors can own in an economic and market downturn.
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AT&T’s earnings have been steady but boring. In the most recent quarter, adjusted for a business it exited, AT&T’s revenues rose 3.1% to $30 billion. Operating income was just shy of $6 billion. Mobile revenue was $20 billion. Operating income for the division was just over $4 billion. The churn rate was about 1%, which is extremely strong and bodes well for the near term. (See which 21 companies make the most profit per second.)
AT&T’s mobile business will continue to benefit from the rotation of customers to super-fast 5G. This migration includes millions of people who will upgrade to the new standard. One wildcard is whether it will gain subscribers from or lose them to Verizon and T-Mobile, the other two large companies in the industry. For all three companies, a recession will not bite much. Wireless service is a nearly universal business.
Among its greatest strengths in a market downturn is its extraordinarily high dividend and yield. At $1.11 per share, that yield is just over 6%. As the stock market resets down, this is a huge advantage for AT&T shareholders. Because of its steady financial performance, its stock price is off only 2% while the market is down 22%. That trend is likely to remain if the market drops further.
Facing a recession and likely ongoing market downturn, AT&T is among the few stocks that investors can consider safe.
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