AT&T Stock Should Be on Your March Shopping List if You Like Dividends

Dividend Stocks

As we get ready to wrap another rollercoaster week in the markets, I’d like to discuss the outlook for AT&T (NYSE:T) stock. So far in 2020, AT&T stock is down about nearly 5%. In comparison, the S&P 500 index is down around 6%.

AT&T Stock Should Be on Your March Shopping List if You Like Dividends

Source: Jonathan Weiss /

The coronavirus from China outbreak has dominated financial headlines in recent days, as many stocks have felt the adverse impact of investor nervousness. That said, I believe that the earnings power of AT&T’s telecom and media-related operations — as well as its robust dividend — will likely support T stock in these choppy times and eventually push the price higher in the long run.

However, if the volatility increases further in broader markets, shares of AT&T stock may decrease some more — making the stock price attractive for most investors.

Here’s why.

AT&T Has Long-Term Catalysts

Overall,  AT&T says it expects to have 5G access available throughout the country by the first half of 2020. And various network providers and smartphone manufacturers have been contributing to the development of this new technology.

When it comes to networks, AT&T and Verizon (NYSE:VZ) are the top playersfollowed by Sprint (NYSE:S) and T-Mobile US (NASDAQ:TMUS). VZ and T also have the most subscribers among U.S. wireless carriers.

With that, many U.S. consumers will likely upgrade to a 5G phone in the coming months. And the group’s flagship wireless services will stay strong, continuing to make the company a cash flow machine.

Meanwhile, the recent WarnerMedia purchase provides AT&T with a strong content asset. Going forward, acquisition synergies are expected contribute to the entertainment group’s revenue.

Additionally, AT&T stock’s current dividend yield is about 5.7%. The shares are expected to begin trading ex-dividend next in early April. In comparison, the S&P 500 dividend yield is shy of 2%.

Therefore, although the markets and AT&T stock may fall more in the coming days, lower share price obviously boosts the prospective dividend yield; Assuming the company does not cut the dividend.

The good news is that most high-quality dividend stocks, such as AT&T, continue paying and even raising dividends during bear markets. In December 2019, the board agreed to increase dividends for shareholders — making it the 36th consecutive year of dividend hikes. In other words, the telecom giant belongs in the coveted group of dividend aristocrats.

So for investors searching for passive income, dividends from T stock keep rolling in regardless of how the market behaves.

What Could Derail AT&T Stock in the Short-Term?

If you are an investor who follows technical charts, then you may be interested to know that the recent price action. With the increased volatility in the markets, investors should feel the urge to be cautious. In other words, market sentiment isn’t bullish at this point.

Over the past year, AT&T stock is up about 24%. On Nov. 18, the shares hit a 52-week high of $39.70. And now, they are hovering around $37.50. However, because of the impressive jump of in 2019, many of T stock’s technical indicators have now become overextended.

That said, in March, I expect T stock to fall toward $34 — a level last seen on Feb 28. And, in turn, I’d look to be a long-term buyer below $35.

Upcoming Earnings Will Be Important

Furthermore, AT&T is expected to report first-quarter earnings in late April. Most of our readers would be familiar with the fact that telecom is neither a high earnings nor a revenue-growth sector. When it reported Q4 results in January, AT&T posted better-than-expected earnings. EPS increased to 89 cents from 86 cents a year earlier, while analysts were expecting 87 cents.

However, it slightly fell short on the top line. Its consolidated revenue came in at $46.8 billion, compared with $48 billion in the same quarter last year. Additionally, analysts were projecting revenue of $47 billion for the quarter. Like most tech stocks, though, the price of AT&T stock tends to be quite choppy around quarterly release dates.

In recent quarters, investors have been concerned with the the company’s debt levels. It is understandably investing considerable amounts in its own 5G network. And that spending adds to its already substantial debt. That said, Wall Street will likely pay close attention to the debt reduction efforts and operating fundamentals, and scrutinize the balance sheet in April for any possible unexpected developments.

Bottom Line on AT&T Stock

If the current investor nervousness about the economic effects of the coronavirus extends well into the spring months, many stocks can become a lot cheaper than they were in the early days of 2020. And that drop may make March a good month to put some money to work and invest in quality companies like AT&T.

Seasoned investors would agree that there are three catalysts to achieving substantial wealth in the markets: dividend shares — such as AT&T stock — compound interest and time. Falling equity markets are now creating important opportunities for long-term income investors looking for high dividend yields offered by robust companies.

Finally, many investors tend to regard telecom stocks as a relatively safe haven if economies suffer setbacks or when there may be a recession. After all, very few people would look to cancel their phone or broadband contracts unless their own personal financial situation became quite strained.

With that in mind, I’d not hesitate to buy AT&T stock on any coming dip in price and enjoy the dividend yield on offer.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, she held covered calls on AT&T stock (March 6 expiration).

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