AT&T (T) offers a wide range of solutions including wireless, data/broadband and Internet, video, managed networking, and cloud-based services. These services are provided through various subsidiaries and affiliates.
5G Spells Cash for AT&T
As one of the world’s largest communications service providers, AT&T has several factors driving its business. For instance, it is in a favorable position to benefit from the impending 5G boom. The 5G industry is still in its early stages and is expected to grow immensely over the next decade.
In a recent report, Oppenheimer analyst Timothy Horan acknowledged the importance of 5G in the development of artificial intelligence, robotics, and cloud. Moreover, with the metaverse coming into the picture slowly but surely, wireless service providers will have more opportunities to make the most of their 5G investments.
Healthy Dividends Keep Investors Motivated
Significantly, AT&T expects to continue to invest in such key areas and upgrade its business according to the constantly evolving market scenario, in order to drive long-term growth. It is noteworthy to mention here that the company plans on, and has been so far successful in, maintaining a healthy dividend payment while making heavy growth-boosting investments.
Notably, the current AT&T dividend payout rate is 61.6%, which means that 61.6% of earnings after paying taxes are paid to shareholders of the company. Although the amount has remained the same for the past two years, it has improved over years. Moreover, the dividend yield has also been improving over the past five years, indicating that the company has been paying a greater percentage of its share prices as dividends.
For the full year of 2021, the company expects to generate a free cash flow of approximately $27 billion with a dividend payout ratio in the high 50% bracket, which also is more than the general healthy payout ratio range of 30-50%.
AT&T’s healthy dividend payout history has kept investors motivated to continue investing in T stock.
Wall Street’s Positive Sentiments Inch Toward Caution
On December 21, 2021, UBS analyst John Hodulik reiterated a Buy rating on the stock but lowered the price target to $34 from $35.
The rest of the Street seems to be cautiously positive about AT&T, with a Moderate Buy based on 5 Buys, 4 Holds, and 1 Sell. The average AT&T price target is $29.22, indicating a 14.9% upside potential.
Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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