×
Newsmax TV & Webwww.newsmax.comFREE - In Google Play
VIEW
×
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
VIEW
Tags: at&t | stock | dividend | verizon

Barron's: Pick AT&T for Dividend Over Verizon

at&t corporate logo symbol emblem on computer pad screen
(Alexey Novikov/Dreamstime)

By    |   Tuesday, 02 April 2019 10:19 AM EDT

America’s largest phone companies reportedly are heading in opposite directions at a breakneck pace after years spent running their businesses in virtual lockstep.

Verizon Communications (VZ) is doubling down on its network, while AT&T (T) is rapidly diversifying beyond the phone business, Barron’s reported.

While Barron’s reports that investors now seem to be favoring Verizon, as its stock climbs, one shouldn’t overlook the power of AT&T’s dividend in the long run.

Verizon’s stock, at a recent $59, has returned 29% over the past year, including dividends, versus 9% for the S&P 500 index, Barron’s explained. AT&T’s stock, meanwhile, has slid 12%, to $31, though the negative return is softened by AT&T’s generous dividend, Barron’s said.

The stocks have historically paid a similar yield, with Verizon averaging 4.5% over the past half-decade, and AT&T averaging 5.4%. Today, they have diverged. Verizon’s dividend yield is 4.1%, while AT&T’s yield, boosted by its falling stock, is 6.6%.

AT&T’s generosity shouldn’t be overlooked. It’s the fifth-highest yield in the S&P 500. And while some skeptics are probably worried about the long-term safety of the payout, the company tells Barron’s that the dividend is “extremely safe.”

“With Treasury yields falling and the Federal Reserve committed to holding interest rates in check, AT&T’s yield could be investors’ best bet for nearly guaranteed income. Its stock, which fetched 14 times year-ahead earnings estimates in 2013, now trades at less than nine times estimates. Verizon stock, meanwhile, looks fairly valued at 13 times year-ahead estimates,” Barron’s reported.

“An uncertain economy makes the telecom business a popular haven for investors. The business typically holds up even in recessionary times, thanks to a wide moat and hefty free cash flows,” Barron’s explained.

“For a stock that has historically been a very low-risk investment, it is now a much riskier proposition,” says veteran telecom analyst Craig Moffett of MoffettNathanson, who rates AT&T Neutral with a $30 price target. He rates Verizon Neutral with a $58 price target.

But as it pays down its debt, AT&T’s risk profile will return to normal. “When they took the leverage up over three times, they shut out a lot of investors, and I think they’re going to come back as they see that leverage come down,” says Frank Louthan, an analyst with Raymond James.

To be sure, USA Today cited 24/7 Wall Street as selecting AT&T as one of the 15 best dividend stocks for investing in retirement planning.

"AT&T Inc. (NYSE: T) may have been a coin-toss with Verizon when it came to historical investing picks for retirees, but AT&T has a substantially higher dividend yield of over 6.5 percent, now that its stock has underperformed so much," USA Today cited 24/7 as reporting.

"The company still has millions of landline and cellular subscribers, and it owns Time Warner and DirecTV. Its investors haven't really enjoyed great returns for a while, but they love that juicy dividend."

© 2024 Newsmax Finance. All rights reserved.


InvestingAnalysis
America’s largest phone companies reportedly are heading in opposite directions at a breakneck pace after years spent running their businesses in virtual lockstep.
at&t, stock, dividend, verizon
484
2019-19-02
Tuesday, 02 April 2019 10:19 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
 
Get Newsmax Text Alerts
TOP

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved
NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved