uploads/2019/08/ATT-3.jpeg

AT&T’s Dividend Yield Is Attractive, Just Ask Goldman Sachs

By

Updated

In the second quarter, AT&T’s (T) free cash flow rose 72.1% YoY (year-over-year) to $8.8 billion. The company’s cash flow from operations also increased 39.6% YoY to $14.3 billion. The capital expenditures rose 7.1% YoY to $5.5 billion in the second quarter. The company expects its free cash flow to increase 25.3% YoY to $28 billion in fiscal 2019.

At the end of the second quarter, AT&T’s long-term debt was $157.9 billion, while its short-term debt was $12.6 billion. AT&T’s net debt balance was $162.1 billion in the second quarter. The company’s debt balance rose after its $85.4 billion acquisition of Time Warner in mid-June 2018.

Article continues below advertisement

AT&T’s dividend yield

AT&T remains committed to paying higher dividends despite its high debt balance. In the second quarter, the company returned $3.7 billion to shareholders in the form of dividends. The returns were higher than the dividend payment of $3.1 billion in the second quarter of 2018. AT&T’s quarterly dividend of $0.51 per share in the second quarter was approximately 2% higher than its quarterly dividend in the second quarter of 2018. The company’s annual dividend is $2.04 per share with a dividend yield of 5.8% as of Thursday.

As reported by CNBC, in a note to clients, Goldman Sachs analysts said, “With the 10-year Treasury yield at just 1.5% and the Fed likely to cut two more times this year, investors should look for opportunities in dividend stocks.” The report also said, “AT&T, Kohl’s and data storage company Seagate Technology all have a dividend yield of about 6% and make the Goldman list of about 50 stocks.”

Article continues below advertisement

Analysts’ recommendations 

Among the 28 analysts covering AT&T stock, 15 recommended a “buy,” 12 recommended a “hold,” and one recommended a “sell.” On Thursday, AT&T stock had a consensus 12-month target price of $34.88. The target price has a 12-month investment return potential of -1.4%. Notably, the return is based on the stock’s closing price on Thursday. The stock’s median target price is $36.00.

Technical levels

On Thursday, AT&T stock closed at $35.39, which was 0.65% higher than its previous closing price, 0.31% lower than its 52-week high of $35.50, and 32.05% higher than its 52-week low of $26.80. AT&T stock has risen about 24% year-to-date. The company’s market cap is $258.6 billion.

Based on the closing price on Thursday, AT&T stock was trading 2.7% above its 20-day moving average of $34.46, 5.2% above its 50-day moving average of $33.64, and 8.6% above its 100-day moving average of $32.60. On the upside, the company’s immediate key resistance lies near $35.57, while $35.14 could act as an immediate key support level on a daily basis.

AT&T’s 14-day RSI (relative strength index) score was 63, which could be approaching the overbought territory. An RSI score above 70 suggests that a stock could be overbought, while an RSI score below 30 suggests that a stock could be oversold.

In the trading session on Thursday, AT&T stock closed near its upper Bollinger Band level of $35.46. The value suggests that the stock is overbought. Investors could take the value as a “sell” signal.

In the second quarter, AT&T reported revenues of $44.96 billion—a rise of 15.3% YoY and $105 million above the consensus estimate. The company reported an adjusted EPS of $0.89—a fall of 2.2%. The adjusted EPS was in-line with the consensus estimate of $0.89. Read What Went Wrong with AT&T’s Q2 Earnings? to learn more about AT&T’s second-quarter performance.

Advertisement

More From Market Realist