Remember when AT&T Inc. (T) was Ma Bell, the biggest, baddest phone company in the world?
Then it got broken up, but even in its new iteration as T stock, and the company, is all about steady, reliable returns and a rock-solid dividend.
While its dividend is still attractive, some other things have changed.
How T Stock Has Evolved
With the growth of mobile telecommunications, the staid, near-utility-like market of landline telecom exploded into a mad dash for growth to survive.
Fortunately, T and its sister, former Baby Bell, Verizon Communications Inc. (VZ), were in a great position to elbow dominant positions in the new mobile sector. It took a while, but when you have a market cap of $238 billion, you’re in no hurry.
Plus, being a cash heavy business, you can always buy the competition if need be.
According to Statista.com, AT&T has about 1/3 of the mobile market share in the U.S. It has successfully made the transition from steady Eddie telecom to a major player in one of the most dynamic sectors in the markets today.
And the fact is … it’s not resting on its laurels.
T is actually starting to up its game even more, knowing that competition is coming from all sides now, not just other telecoms. T stock’s challenges now come from cable providers and their content, internet companies transitioning to the mobile platform and upstart competitors in the mobile space that eat at market share and challenge margins.
T bought satellite broadcaster DirecTV last year to build a bundling package — mobile phone service and internet and television services for one price — so it could take on VZ, which has been offering its fiber optic service FiOS with mobile plans for years now.
Then, another big boost came along for T stock, as it began its Gigapower expansion. This is AT&T’s new high-speed fiber optic network that has blazing speeds up to 1 gigabit per second. Select cities in California were the first to get the system, but T plans to expand it across the U.S.
Also, AT&T has been spending big to upgrade its mobile network and security. It has spent billions in West Virginia, Louisiana and other states to make sure the networks are secure and ready for 5G telecom when its time. It spent $7 billion in California alone, adding 69 cell sites and 14 system upgrades along with Gigapower work.
The point is that AT&T stock’s strength comes from the fact that the company is not scared to spend. And it is spending well at this point.
The slow economy has made mobile phone growth slow as well, and it’s likely why AT&T has extended its generous phone and bundling packages, while also pivoting to shore up its new content distribution empire by acquiring streaming service Quickplay Media.
Adding a strong streaming service means T can integrate its phone service with its content services and grow that part of the business while the consumer-buying trend works itself out.
For example, according to Statista.com, mobile revenue grew threefold from 2014 to 2015. That’s why AT&T is moving so aggressively on this front.
All this from a dividend aristocrat (T stock has raised its dividend every quarter for the past 31 years and counting), makes for a compelling package.
The company’s product mix is changing and analysts are a bit confused by how to value the transitioning company’s various sectors, but the bottom line is, T is making some very good choices to keep AT&T stock a dominant force for years to come.
And a nearly 5% dividend certainly helps.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
