We recently compiled a list of the Top 20 Dividend Stocks of 2024. In this article, we are going to take a look at where AT&T Inc. (NYSE:T) stands against the other dividend stocks.
Macroeconomic factors have weighed on US stocks in the final days of the year, with the broader market declining by over 1% in the past week. Despite this post-Christmas slowdown, US financial markets are on the verge of closing out another exceptional year. The broader market index is projected to post a roughly 25% gain for 2024, marking the first back-to-back annual increases of more than 20% since 1997-1998. This strong performance has been supported by positive economic indicators, including resilient consumer spending and a robust labor market. Inflation, though still elevated, has shown consistent signs of moderation.
Improved economic data and easing inflation have also influenced the Federal Reserve’s policy shift this year. Anticipation of rate cuts contributed to market growth, with the central bank implementing its third rate reduction in 2024.
Dividend stocks have had a relatively weak performance this year, with the Dividend Aristocrats Index achieving a modest return of about 4%, widening the gap between its performance and that of the broader market. The index tracks the performance of companies that have raised their payouts for at least 25 consecutive years. However, investors shouldn’t lose confidence in these results, as the value of dividend stocks becomes more apparent over the long term. A report by Franklin Templeton highlighted that, since 1926, dividends have accounted for nearly one-third of the total equity returns of US stocks. Additionally, from 1980 to 2019—a period marked by a sharp decline in interest rates—dividends contributed 75% to the market’s overall returns.
Investors are often drawn to dividend growth stocks because dividend payments are generally viewed as a sign of long-term commitment. Maintaining these payments demands profitability, strong returns, and consistent cash flow generation, making them a valuable indicator of a company’s quality. Businesses that regularly raise their dividends showcase their ability to consistently generate profits, which can also signal greater resilience during economic or market downturns. According to research, companies within the broader market that pay dividends have historically been more profitable compared to those that do not.
Reflecting investors’ preference for dividend stocks, many US companies are increasing their payouts and implementing dividend policies. As of September 30, 2024, around 80% of companies in the Index paid dividends, a figure consistent with a decade ago. Notably, 24% of these dividend-paying companies now belong to the technology sector, a significant rise from 13% ten years earlier, as reported by Franklin Templeton. Other innovative industries, such as healthcare and industrials, have also seen growth in dividend payers.
This broader adoption of dividends has expanded the range of options for equity income investors, offering greater access to dynamic and high-growth companies. For instance, major tech companies that are market leaders have recently introduced dividends. Meanwhile, established tech giants demonstrate that dividend payments can coexist with innovation and reinvestment, proving that companies can excel at both.
Our Methodology:
For this list, we reviewed a selection of dividend stocks and identified those that have provided positive returns in 2024. From this group, we focused on companies offering yields above 2% as of December 30. We then narrowed down the list by selecting companies with the most hedge fund investments, based on Insider Monkey’s Q3 2024 database. The stocks are arranged in ascending order of hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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AT&T Inc. (NYSE:T)
Number of Hedge Fund Holders: 59
AT&T Inc. (NYSE:T) is an American telecommunications company that offers a wide range of related services and products to its consumers. In 2022, the company refocused its efforts by merging its WarnerMedia division with Discovery, transitioning away from the media sector to strengthen its telecom operations. Since CEO John Stankey took over in 2020, the company has made notable progress in restructuring and lowering its long-term debt, positioning itself for sustainable growth in the future.
AT&T Inc. (NYSE:T) is now highly focused on investing in digital infrastructure, particularly its mid-band 5G network, which now reaches over 210 million people. This commitment to advanced technology enhances its competitive position and boosts service reliability. Additionally, the company is addressing social issues by working to close the digital divide and offering affordable broadband services to underserved communities. With a 12-month return of over 31%, T is one of the best dividend stocks on our list.
In the third quarter of 2024, AT&T Inc. (NYSE:T) reported revenue of $30.2 billion, reflecting a slight decline of 0.5% year-over-year. Despite challenges such as severe weather and a workforce stoppage in the Southeast, the company marked its 19th consecutive quarter of adding over 200,000 new AT&T Fiber customers. AT&T continues to expand its largest segment, Mobility and is on track to lead the industry in postpaid phone churn for the 13th time in 15 quarters. The company remains committed to making strategic industry investments, reducing debt, and increasing its free cash flow for the year.
AT&T Inc. (NYSE:T)’s cash position also came in strong. In the most recent quarter, the company generated $10.2 billion in operating cash flow and its free cash flow came in at $5.1 billion. The company pays a quarterly dividend of $0.2775 per share and has a dividend yield of 4.91%, as of December 30.
Overall T ranks 8th on our list of the best dividend stocks of 2024. While we acknowledge the potential of T as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than T but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
