6. AT&T Inc. (NYSE:T)
Dividend Yield as of January 21: 4.94%
AT&T Inc. (NYSE:T) is an American telecommunications, media, and technology services company that provides a wide range of services to its consumers. Over the past year, the stock has seen a nearly 34% increase in its stock price, driven by improved fundamentals like higher gross margins and lower debt levels. In Q3 2024, the company also revealed the sale of its remaining 70% stake in DirecTV to private equity firm TPG, a move that will provide substantial cash flow to reduce debt further and deliver value to shareholders. With a strong balance sheet, rising share price, and attractive dividend yield, AT&T is becoming an appealing choice for income-focused investors.
In recent years, AT&T Inc. (NYSE:T) has steadily grown its wireless and fiber internet subscriber base. From September 2022 to September 2024, it added about 7.5 million wireless customers. In addition, it gained more than two million fiber subscribers during this time, helping to offset the decline in demand for traditional wireline services. TCW Funds stated the following about AT&T Inc. (NYSE:T) in its Q3 2024 investor letter:
“AT&T Inc. (NYSE:T), based in Dallas, TX, is a nationwide provider of voice, video, and data communications services to businesses and consumers in the wired, wireless, and broadband. At initiation, the stock had a $141 billion market capitalization and met all five valuation factors with an above market dividend yield of 5.6%. From a sustainability prism, the company completed its commitment to invest $2 billion by the end of 2023 to help bridge the digital divide. AT&T is working on enabling low-income households to access to low-cost broadband services through its Access service plan as well as reaching out to more rural communities and Tribal lands where internet access remains a challenge. It is nearly 85% the way to providing one million people in need with digital resources through AT&T Connected Learning® with the goal to be reached by the end of 2025. In 2020, the company announced that it is committed to be carbon neutral by 2035 with zero carbon emission across all operations. It is deploying Smart Climate Solutions – through efforts like its Connected Climate Initiative – that will help enable its business customers to reduce their emissions as well. The company’s goal is to help collectively reduce its emissions by one billion metric tons – a gigaton – by 2035, compared to 2018 levels. The primary catalysts are new/strong management and restructuring. John Stankey was appointed CEO in July 2020 and he is committed to refocusing the company and improving its financial performance. The company combined its WarnerMedia operation with Discovery during 1Q:22 which eliminated AT&T’s exposure to the rapidly evolving media industry and refocused its core telecommunication business thus eliminating a major drag on profitability and the company’s balance sheet by reducing long-term debt from a peak $176 billion during 2020 to $142 billion at the end of June 2024 quarter. AT&T is moving aggressively to reduce cost and sell non-core assets such as its advertising platform Xander to Microsoft† which was accomplished during 2022. The company has redesigned its network to be software driven structure reducing the capital investment cycle in its national network – resulting in a network that is flexible with unrivaled speed and reliability – thus enhancing its nationwide position. By the end of 2023, it expanded its 5G network to reach more than 302 million people in nearly 24,500 cities and towns in the U.S. The company’s mid-band 5G+ network alone grew to cover more than 210 million people. AT&T is one of the largest investors in digital infrastructure in the U.S. Over the five years ending 2023, the company invested nearly $150 billion primarily in its wireless, fiber optics, and wireline networks. The extensive restructuring and refocusing of AT&T on its core business should result in improved earnings and cash flow while at the same time reducing uncertainty for shareholders.”
AT&T Inc. (NYSE:T) has remained committed to returning value to shareholders as the company plans to distribute over $40 billion to its shareholders via dividends and share buybacks within the next three years. The company’s cash generation remained stable in the most recent quarter, with its operating cash flow and free cash flow coming in at $10.2 billion and $5.1 billion, respectively. It currently offers a quarterly dividend of $0.2775 per share and has a dividend yield of 4.94%, as of January 21.
With a collective stake value of more than $5.6 billion, 59 hedge funds tracked by Insider Monkey held positions in AT&T Inc. (NYSE:T) at the end of Q3 2024. Arrowstreet Capital was the company’s leading stakeholder in Q3.
