# AT&T, Inc. (T)



## Homerhomer (Oct 18, 2010)

I have been looking at this company for a while now due to nice dividend yield and the fact it has raised the dividends for for over 25 years, with the purchase of T-Mobile there may be significant buying opportunities (maybe not ;-) in the near future, however to be honest I am not sure I want to touch it at all.

Even before the purchase, the dividend growth has been slow (about 5% over 5 years), payout ratios over 70% (although it dipped to 50% in 2010), earnings growth spotty with good years between no or very little growth, they already have over 100 billion in loans, now they get another loan for 20B and issue 15B in common shares for the purchase, will most likely have crap load of one time charges, and if the deal falls through will have to pay 3B in compensation fees. Not to mention industry with huge capital expenditures and pricing pressures.

Thankfully I am not a shareholder, but do I want to be one if there is a significant buying opportunity in the near future, can they maintain (increasing) dividends, am I the only one seeing dark clouds ahead for AT&T shareholders?


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## Homerhomer (Oct 18, 2010)

... and big T is up 5% or so in premarket, ohh how wrong was my initial assessment.... at least short term ;-)


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## brad (May 22, 2009)

I think of AT&T as the Microsoft of the telecoms -- a big lumbering Brontosaurus that will probably be brought eventually down by the dozens of nimble velociraptors tearing away at its hide.

They got a big boost with the iPhone, but customers are defecting to Verizon in droves, in many cases even before their contracts are up, because the AT&T experience is so lousy -- dropped calls, labyrinthine bureaucracy, 30-page phone bills, etc.


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## warp (Sep 4, 2010)

I have owned ATT for several years...

Im not sure how this T-Mobile takeover will work out...but Im not selling it.

I might also say that I also own Verizon...and I also own Vodaphone.

So perhaps you should buy more than one telco....the divs are good....and I think they are stable over the long run...maybe not 3 baggers, but good cash flow.

I am also looking at Telefonica for their cental and south America exposure.

A friend suggested I look at Telstra too..( Australian), and I have been looking at NZT..( New Zealand),,for quite a while.

You might tell from all these that I am a div guy.

good luck


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## Homerhomer (Oct 18, 2010)

warp said:


> You might tell from all these that I am a div guy.


So am I (for the most part ;-).

Obviously the street likes the merger (although not as much as it did 4 hours ago ;-), hopefully the benefits will outweigh the costs, which on the surface appear to be huge (share dilution, $20B loan, transaction costs, various one time charges). Last two dividend increases were 1.8% and 2.5% respectively, and I believe the expectation is that next increase will be only a penny (which is pretty much just to keep the streak going). 

With $14B in additional common shares the earnings will be diluted by around 8%, I gather there is an expectation of tangible growth from the transaction, otherwise the stock wouldn't be up. I for one do not see this stock as a great dividend growth in the near future, and imo growth is actually more important than current yield.

Hope you do well on this stock Warp ;-)


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## humble_pie (Jun 7, 2009)

so sorry i don't have this link but recently was reading an article (globe ? natpost ?) about how the big telco shares are slowing down, in fact may be somewhat at risk esp if global correction gets underway.

article proposed a telco etf as a substitute & named most of them. Most liquid one is ishares IYZ. This was my pick couple years ago, because it also has fairly liquid options market. Article mentioned a new etf for mobile devices only, symbol something like FONE.

sorry to be vague so far. But article also alluded to recent insider selling in bce so i checked this out. Indeed bce ceo george cope did exercise options & sell about 1.2 million shares on or about 1 mar/11. That was not an impulse trade heh.

there has been light insider buying (few thousand shares) in bce since early march.

in telus, there has been light insider selling recently but nothing on scale of cope.


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## thompsg4416 (Aug 18, 2010)

*At&t*

Wondering what the consensus is on this one. 

Pros
Pe under 10
Div over 5.5%

Con's
Net profit margin is below industry standard
Low current
Fairly high debt

PE suggests value but they seem to be fueling growth via borrowing. Anyone else have any insights?


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## jacofan (Apr 17, 2013)

it's on my watchlist but not sure if I will pull the trigger on it,


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## thompsg4416 (Aug 18, 2010)

jacofan said:


> it's on my watchlist but not sure if I will pull the trigger on it,


I did yesterday. Looks cheap to me - was wondering if others see something I don't.


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## gibor365 (Apr 1, 2011)

thompsg4416 said:


> I did yesterday. Looks cheap to me - was wondering if others see something I don't.


I added more shares several days ago.... not bad P/E, dividend champion and juicy yield....


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## londoncalling (Sep 17, 2011)

still watching... looking to buy something just waiting to see what.


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## My Own Advisor (Sep 24, 2012)

@londoncalling,

You don't like the entry point? Pretty good right now although it might get better.


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## londoncalling (Sep 17, 2011)

I agree the entry point is definitely good. I am more split on where to put this money US telcos, lifecos or banks, Canadian lumber or Europe.


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## My Own Advisor (Sep 24, 2012)

I see. Bullish on U.S. telcos, I don't see hundreds of millions of Americans giving up their iPhone contracts anytime soon. Also like VZ for the same reason. Not too savvy on U.S. lifecos, although AFL:US has had a good run since 2012 and P/E now signals buy.

Own Wells Fargo.

Canadian lumber, not sure. 

Europe, same. What in Europe are you looking at? VEA?


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## gibor365 (Apr 1, 2011)

I hold just VEA and it's enough for me


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## thompsg4416 (Aug 18, 2010)

I've always loved SAN


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## londoncalling (Sep 17, 2011)

I was thinking a core portion of VEA with a smattering of European and UK banks, telcos and utilities that are purchasable as ADRs.


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## can_84 (Jul 2, 2011)

I was wondering if anyone has put sometime in to AT&T to know why the PE ratio is so low?


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## robfordlives (Sep 18, 2014)

It is incredibly low indeed. I don't have time to dig into their financials. Presumably it has to do with the sector rotation out of defensive stocks. I hold the big four telco's in Canada - I should probably see this as a warning signal to lighten up my holdings there. I wonder though with all of these type of stocks....for every 1% increase in the Fed rate, what kind of impact does that cause on EPS? The rotation out of these names and into growth seems out of proportion to me


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## robfordlives (Sep 18, 2014)

On second look is it that low? $3.05 eps for FY2017 so 10.8 PE ratio and I would expect 10-12 for a telco. When I googled, it showed p/e ratio in the 6's but that is clearly not correct.

FWIW ValueLine projects $55-$60 share price in 2022 based on expected earnings.


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## doctrine (Sep 30, 2011)

AT&T's revenue is dropping. What P/E multiple would you pay for a company with declining annual revenues? They a huge company, and it is not easy to turn a large ship around. And with higher interest rates, it will put double pressure on its bottom line.


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## Eder (Feb 16, 2011)

I think BCE, Rogers & Telus are all growth stocks. The fact they pay out much of their success in the form of dividends make them even more desirable. (I have no opinion on AT&T though)


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## james4beach (Nov 15, 2012)

The AT&T (T) dividend yield is now 6.6% and was as high as 6.8% a day earlier. Currently it pays $0.51/quarter = $2.04/year.

That's 6.6% yield vs the S&P 500 yield of 2.1% and 10 year treasury yield of 2.7%

The company *raised its dividend for 34 consecutive years* and just raised its dividend again (source: Bloomberg). So here's an important question for all the dividend investors on this forum: Does the backward-looking statistic of 34 consecutive years of dividend increases give you the confidence to say that if you buy this, the price will no longer matter, and you're going to get a healthy dividend stream forever?

I'm pressing the point because all these books and blogs on dividend investments, dividend growth investing, all use the same logic: that you can simply screen stocks and choose the most reliable dividend payers. Therefore (the argument goes) these stocks will keep raising their dividends perpetually, so share price no longer matters. Even if prices drop, the cashflow from dividends keeps increasing, forever.

Those arguing these points conveniently ignore stocks like GE, which paid dividends for 100+ years and raised its dividend for 32 consecutive years (source: GE) and various US banks, which all saw their dividends slashed.

I'm not trying to be a pain. I just want people to carefully consider the potential pitfalls of "dividend investing", because I feel that investors going down this route are often overconfident. Just like price performance, backwards-looking histories of dividend payouts do not assure future dividend payouts. Just because GE raised dividends for 32 years, or AT&T raised dividends for 34 years, doesn't necessarily mean the dividend is safe.

And once one of these dividend stocks cuts their dividend, the share price crashes, meaning that you get a loss in capital. That share price you were trying to ignore suddenly matters again, and those years of reliable dividend payouts are meaningless. I really do worry about dividend investors, and this dangerous game they play with their capital.

Some might say that you (obviously) must monitor your dividend growth stocks and ensure you keep only the best ones in your portfolio. AT&T has taken on a huge amount of debt and their credit rating has been cut. So I guess that an astute 'dividend growth investor' would remove T from their portfolio? Well OK, but then you suffer a loss as the price dropped long before you figured this out. These are the important nuances of portfolio management that dividend investors don't seem to consider.

Or do you leave T in your portfolio because its dividend is likely safe? These are important questions. The same questions will eventually come up for Canadian dividend favourites such as RY, TD, BNS, CM, BMO, NA, ENB, BCE, etc. It came up 10 years ago and will come up again.

As a dividend investor, you probably won't encounter these issues in your first 5-10 years. I think what potentially makes dividend investing so dangerous is the false sense of security and lack of preparation for the challenge that suddenly strikes at year 12, 17, and again at year 29. Successfully managing your portfolio through those hiccups is very difficult. My guess is that most dividend investors will do _worse_ than passive index investors long term, in total return. That means retirement money would actually stretch further with passive index investing and traditional asset allocation.


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## gibor365 (Apr 1, 2011)

As far as T has reasonable fundamentals, like payout ratio , I will continue to hold it and DRIP dividends. GE is in different business. And if I hold 50 stocks that increase dividends every year, even if couple of stock will cut dividends , it won't really affect my dividend income.
For example couple of years ago many of the oil companies I held cut/suspended dividends : COP, HSE, CPG .... , but majority increased dividend, so my dividend income still was up


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## fatcat (Nov 11, 2009)

james4beach said:


> The AT&T (T) dividend yield is now 6.6% and was as high as 6.8% a day earlier. Currently it pays $0.51/quarter = $2.04/year.
> 
> That's 6.6% yield vs the S&P 500 yield of 2.1% and 10 year treasury yield of 2.7%
> 
> ...


james, let's face you really are a "saver" who likes to hang out on an investment forum ...

your argument is empty, nobody can guarantee anything about any equity going forward ... you bet on a company and a company that establishes itself as a steady dividend payer is likely to continue

some people stick to their mutual funds, some have their 6-packs or 12-packs, some have their mix of etf's and invest passively

some people never buy anything but gic's and government bonds ... i wonder what will happen with regards to bonds/gic's if god forbid, we have a mega-crash, i suspect that government will find itself insolvent and unable to even print enough money to bail itself out and then guess what ?

the bond and gic holders are going to be told "sorry, we can only guarantee 50% of your investment"

coca-cola is a dividend champion and if the mega-crash comes they will at least have a product that people will want to buy and consume, unlike the paper that bonds and gic's are written on

take a deep breath james, there is no investment vehicle now or in the future that will ever be a guarantee

ps. gibor has it right, using a single stock as an argument when the vast majority continue to pay steadily makes no sense ... diversification and asset management is the key as you well know


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## londoncalling (Sep 17, 2011)

As with anything it is total return that should be the main driver of success. I have been DIY investing for over 10 years. Granted we have also seen 10 years of exceptional returns I thought I would weigh in. I made a lot of mistakes (as did most) early in my investing career. In fact, I have 3 separate portfolios (LIRA, RRSP and TFSA). The LIRA has the longest history with no money added, then RRSP which I have stopped adding to in the last 18-24 months and most recently TFSA all new funds. I did create an Investor Policy Statement but it has changed over time. With the LIRA I chased yield and wanted to generate income. I bought energy stocks during peak oil and didn't understand fundamentals as do as I do now. I also missed out on some great stocks as I was too entrenched in pricing. While price is important a couple of pennies doesn't make much difference on a $50 stock. With my RRSP I wanted to ensure I had better asset allocation and focus on a balancing yield and dividend growth. I have maintained the same strategy for my TFSA. My RRSP and TFSA have far outperformed my LIRA. Investing models fall in and out of fashion. 

I think it is important for an individual investor to find the method to generate wealth that works best for them. I had a strong feeling amazon would shoot out the lights but sat on the sidelines despite my instincts telling me to buy as it didn't fit my model. I also had people telling me to buy bitcoin at its peak. I missed out on the cannabis run as well. However, my portfolio has exceeded desired return and I have learned a lot along the way. Many others have done quite well with RE but I don't want to do the research or be a landlord. I am up on my current dwelling but I don't include it in my portfolio as I don't have plans to sell my home until I downsize near retirement. 

To get into the specifics of AT&T I have an after cost total return of over 4.5% a year over the last 3 including dividends and current capital loss. Not outstanding but better than others. Some of which I own. :tongue-new: I have done much better with the Canadian dividend favorites (RY, BNS,BMO, ENB) mentioned above some of which have given > 15% a year and more than doubled my total return (unrealized). Anybody who has held Canadian banks since 08 have done amazingly well and doesn't need me to post my returns. Will stocks revert to the mean? Usually, However, I am suggesting that over the long term (10, 15 20 years) the decline will not exceed the initial investment if bought at a good price and returns will likely meet or exceed the market. It makes sense as many of these stocks are the bulk of the index. Since I am in accumulation I saw 2018 as an opportunity to add to positions that I had missed out previously. If I was nearing retirement or in withdrawal I would have not enjoyed 2018. I believe I would have a different portfolio composition as far as equity to fixed components.

James: I guarantee we can find periods throughout time to confirm or contradict any investment thesis. I do appreciate your efforts to remind investors of the potential pitfalls of complacency. In fact, I am going to review each one of my positions for potential GEs. I just wanted to point out that historically stocks that pay a growing dividend have generally outperformed over the long haul. 

As a final note: I hold AT&T and looked at adding over the last few months but took a pass as I have put in orders for other stocks. (TD as a prime example).

Cheers


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## OnlyMyOpinion (Sep 1, 2013)

As gibor and fatcat have noted, your dividend portfolio should be diverse so that no individual holding can cause too much damage. I now sell if a company cuts its dividend. Even though the price will have dropped, the loss (or reduced gain) is immaterial.
As for picking the stocks, I'd consider a yield over 6% very cautiously (stretching for yield) and want to understand why it is that high - are we in the midst of an overall correction or is this stock out of favour for good reasons. I also favour Cdn companies for the dividend tax credit in unregistered accs. For those reasons, AT&T wouldn't hit my radar,
I think my last sell on a dividend cut was MTL in 2017, no substantial damage done, carry on.


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## fatcat (Nov 11, 2009)

OnlyMyOpinion said:


> As gibor and fatcat have noted, your dividend portfolio should be diverse so that no individual holding can cause too much damage. I now sell if a company cuts its dividend. Even though the price will have dropped, the loss (or reduced gain) is immaterial.
> As for picking the stocks,* I'd consider a yield over 6% very cautiously (stretching for yield) and want to understand why it is that high* - are we in the midst of an overall correction or is this stock out of favour for good reasons. I also favour Cdn companies for the dividend tax credit in unregistered accs. For those reasons, AT&T wouldn't hit my radar,
> I think my last sell on a dividend cut was MTL in 2017, no substantial damage done, carry on.


me too, i am always leery of companies that break 6% that is my magic number to wonder what is really happening ...


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## james4beach (Nov 15, 2012)

I agree that diversification is key, so that a single stock that turns sour (GE, AT&T, TransAlta, etc) can't wreck the portfolio. You also need sector diversification. I think it's very challenging to put together such well diversified dividend portfolios.

I worry about these investors who pop up on the forum asking about dividend investing, because they heard somewhere that it will make their retirement savings stretch further. These are probably people who don't even have basic experience managing a portfolio of stocks. Now they are told they just have to screen for some great dividend stocks and load up an account with them. How's that going to work out for them?

fatcat, OnlyMyOpinion & some others here can do it, sure. But I think CMF paints a deceptively simple story about the dividend investment process.



fatcat said:


> me too, i am always leery of companies that break 6% that is my magic number to wonder what is really happening ...


This shouldn't be a hard number, but something relative to the 10 year bond yield


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## fatcat (Nov 11, 2009)

james4beach said:


> I agree that diversification is key, so that a single stock that turns sour (GE, AT&T, TransAlta, etc) can't wreck the portfolio. You also need sector diversification. I think it's very challenging to put together such well diversified dividend portfolios.
> 
> I worry about these investors who pop up on the forum asking about dividend investing, because they heard somewhere that it will make their retirement savings stretch further. These are probably people who don't even have basic experience managing a portfolio of stocks. Now they are told they just have to screen for some great dividend stocks and load up an account with them. How's that going to work out for them?
> 
> ...


james, i do agree that "dividend growth" is a currently hot flavour of the month for investing styles and is often sold as being easy when, in fact, no investment plan is easy ... all, even government bonds have risk

6% is just a signpost for me, that's my magic number and on its own i agree, isn't definitive


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## gibor365 (Apr 1, 2011)

I'm planning to convert SRRSP to SRRIF later this year, and with dividend stocks it's much easier for psychologically, I just turn off DRIP on some stocks and my minimum withdrawal would be covered. ....in case I have non-dividend stocks or even index ETFs, I should've every year to thing what to sell and where to sell.... and selling when market is down is not very comfortable for me.


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## james4beach (Nov 15, 2012)

gibor365 said:


> I'm planning to convert SRRSP to SRRIF later this year, and with dividend stocks it's much easier for psychologically, I just turn off DRIP on some stocks and my minimum withdrawal would be covered. ....in case I have non-dividend stocks or even index ETFs, I should've every year to thing what to sell and where to sell.... and selling when market is down is not very comfortable for me.


Good point gibor. Dividends are very convenient for the automatic cash extraction


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## l1quidfinance (Mar 17, 2017)

> The company raised its dividend for 34 consecutive years and just raised its dividend again (source: Bloomberg). So here's an important question for all the dividend investors on this forum: Does the backward-looking statistic of 34 consecutive years of dividend increases give you the confidence to say that if you buy this, the price will no longer matter, and you're going to get a healthy dividend stream forever?



I think that this can be starting point from which to do your own research. 

Standard valuation practices should continue from here. 

Are earnings growth and payout climbing in tandem? Does the P/E meet your criteria? What is the payout ratio? Is debt growing?

Each investor should have his or her own metrics and there is never a quick fix for doing your own research. Now if this fits within that criteria then maybe the market has it wrong. 

I would agree with Fatcat here



> 6% is just a signpost for me, that's my magic number and on its own i agree, isn't definitive


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## gibor365 (Apr 1, 2011)

> 6% is just a signpost for me, that's my magic number and on its own i agree, isn't definitive


 imho, you should look into fundamentals and not yield .... do you know what was BMO yield during 2008-09 recession?!!!!! Would you sell it?!


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## james4beach (Nov 15, 2012)

gibor365 said:


> imho, you should look into fundamentals and not yield .... do you know what was BMO yield during 2008-09 recession?!!!!! Would you sell it?!


The bank was borderline insolvent and needed massive assistance to stay alive. They could have cut the dividend. If a similar scenario happens again, it's just as likely that stock holders would get wiped out (which is what happened with many other global banks).

Someone who held onto BMO (or CIBC, or Scotia) during the crisis just got lucky: 1- that the dividend continued and 2- that the equity didn't get wiped out.


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## gibor365 (Apr 1, 2011)

> If a similar scenario happens again


 another massive assistance will be provided


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## gibor365 (Apr 1, 2011)

I just want to understand ..... so,if stock you hold hits 6% yield, do you sell it?


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## OnlyMyOpinion (Sep 1, 2013)

gibor365 said:


> I just want to understand ..... so, if stock you hold hits 6% yield, do you sell it?


From my perspective, not necessarily - but, per my post #22, _I'd consider a yield over 6% very cautiously (stretching for yield) and want to understand why it is that high - are we in the midst of an overall correction or is this stock out of favour for good reasons._


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## gibor365 (Apr 1, 2011)

OnlyMyOpinion said:


> From my perspective, not necessarily - but, per my post #22, _I'd consider a yield over 6% very cautiously (stretching for yield) and want to understand why it is that high - are we in the midst of an overall correction or is this stock out of favour for good reasons._


OK. Got it , but many solid REITs has yield above 6%, also some of the my best performing stocks on NYSE at some time had yield more than 6%.....and on the other hand some stocks with much lower yield stop paying dividend, recent example CLIQ (former LIQ)


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## l1quidfinance (Mar 17, 2017)

gibor365 said:


> OK. Got it , but many solid REITs has yield above 6%, also some of the my best performing stocks on NYSE at some time had yield more than 6%.....and on the other hand some stocks with much lower yield stop paying dividend, recent example CLIQ (former LIQ)


REIT can not be compared to a regular common stock. They are a trust and flow through income and also a composition is often ROC and thus makes a higher yield. Vastly differing tax consequences. 

As for CLIQ / LIQ the writing was on the wall for a long long time with that one. I remember looking at the financials when I fist joined this forum. Im sure it was in the 7% yield range in 2014 ish I was tempted several times but it was plain to see they could never support the payout. I could never wrap my head around it and so stayed away. 

There is never a substitute for your own research. 

So the question is based on the fundamentals does the payout of AT & T appear to be safe?


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## james4beach (Nov 15, 2012)

gibor365 said:


> another massive assistance will be provided


If a bank has problems, yes it will get massive assistance, but that does not necessarily preserve the equity. Citigroup and Bank of America had huge assistance from the US govt and their equity has been destroyed.

But many investors in Canadian banks seem to think that (inevitable) government bailouts will preserve their equity value. I think this is a big mistake in reasoning.


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## AltaRed (Jun 8, 2009)

I have a lot less concern about our banks now that they have to have higher Tier 1 capital ratios and their debt including potential conversion of prefs into useless common equity, has to be NVCC compliant. It means their shateholder and debt holder capital structure would be destroyed before a taxpayer bailout happens. That would be a Joan of Arc moment for the executives.


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## james4beach (Nov 15, 2012)

AltaRed said:


> I have a lot less concern about our banks now that they have to have higher Tier 1 capital ratios and their debt including potential conversion of prefs into useless common equity, has to be NVCC compliant. It means their *shareholder ... would be destroyed before a taxpayer bailout happens*


I'm not concerned about the banks either. The banks will be ok; it's the _shareholders_ that will be destroyed once their equity is diluted into oblivion. This could have happened in 2008 but shareholders of Canadian banks got lucky.


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## CPA Candidate (Dec 15, 2013)

James is the epitome of the cognitive bias known as loss aversion, but I do think AT&T is not so hot as a dividend stock.

I inherited some AT&T stock but am looking for some strength in the stock price to make an exit. I am not interested in their new media businesses (Warner) which is probably end in tears and I already have Canadian telecom exposure.

Total returns on T have been well below that of the SP500 over the past 5 years. It's been setting lower lows for a couple years now.


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## fatcat (Nov 11, 2009)

CPA Candidate said:


> James is the epitome of the cognitive bias known as loss aversion, but I do think AT&T is not so hot as a dividend stock.
> 
> I inherited some AT&T stock but am looking for some strength in the stock price to make an exit. I am not interested in their new media businesses (Warner) which is probably end in tears and I already have Canadian telecom exposure.
> 
> Total returns on T have been well below that of the SP500 over the past 5 years. It's been setting lower lows for a couple years now.


agree, telecom sits with media, energy and pipelines as sectors i am very leery about and try to avoid (we don't _have to own_ anything) due to politics and plain old technological disruption (i only own tech companies in etf's)

i looked at att but decided to pass and stick with telus as my one telco, i can follow them better


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## james4beach (Nov 15, 2012)

CPA Candidate said:


> James is the epitome of the cognitive bias known as loss aversion, but I do think AT&T is not so hot as a dividend stock.


I just understand the risks of these things. There's no problem investing in AT&T, or banks, or anything as long as one has a realistic idea of both upside & downside.

Beware aware of both upside & downside is not loss aversion bias. In fact it's a vital part of any kind of risk taking, and that includes thinking through the worst case scenarios.


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## james4beach (Nov 15, 2012)

T's yield is now 7.2%. I just wanted to point out something about "dividend investing". I think AT&T is a good example of how focusing too much on yield can create a misleading picture and harm your capital.

At first glance, T seems like it's been an OK investment. The 5 year cumulative total return (including dividends, not annualizing) is +16% so you might say, great, it's making money. And it's paying a big dividend.










But is that really OK? Here's what the broader S&P 500 has done in the same 5 years. It's up 84%.










So while the investor didn't lose in AT&T in absolute terms, they certainly did much worse than the broader index. It's a significant underperformance, and in my view, that's harmful since most of us want our capital to last as long as possible into the future.


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## londoncalling (Sep 17, 2011)

I wanted to give this thread a bit of a bump. We are looking at a low interest rate environment for the near term if not longer. I have a tiny position in this US telco and hold BCE and Telus as well. I noticed that the EPS does not meet the current payout and the stock has cut its dividend in the past. The stock is inching closer to the march lows and gave me reason to revisit. I briefly considered placing an order this evening. I think Verizon is probably a better company in this space but perhaps there is a bit more value with AT&T. I don't believe there are many members that stock pick US equities but would welcome any analysis. I am wanting to keep my powder dry for other purchases as we move closer to the US election so will hurry up and wait on this one. Whether or not we see another drop in the next month or so I plan to allocate some cash to equities.


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## AltaRed (Jun 8, 2009)

Dead money. Going nowhere.....


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## james4beach (Nov 15, 2012)

AltaRed said:


> Dead money. Going nowhere.....


I see that AT&T now has a 7.5% dividend yield, which itself should be a warning sign. But the total return is far more important. Here are AT&T trailing returns.

5 years: 2.4% CAGR ... vs ... 14.0% for US mkt
10 years: *5.0% CAGR ... vs ... 13.8%* for US mkt
15 years: *6.1% CAGR ... vs ... 9.9%* for US mkt

Nothing to write home about. What does this stock offer you that the dumb old index does not? I don't pick individual US stocks, but if I did, I would be looking for companies which have a history of outperforming the index.

In comparison, BCE and T have performed on par with, or better, than the Canadian index.


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## londoncalling (Sep 17, 2011)

Thanks for the feedback James and Alta. Another example of how chasing yield can result in underperformance. Canadian telcos definitely are more appealing (better balance sheets, moats and opportunity). I am at full allocation for Canadian telcos and happy with their return.


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## doctrine (Sep 30, 2011)

Picking US stocks is pretty difficult. I am a fan of the US index. Also this industry in particular seems to be very cutthroat in the US. Canadian telcos definitely leverage their monopolistic position and lack of foreign competition barriers to keep their margins healthy.


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## londoncalling (Sep 17, 2011)

AT&T Reports First-Quarter Results (tmx.com) 

Still holding this US Telco but makes up less than 1% of my portfolio. Earning report was well liked share price up 4% on the day. Have no desire to add or sell. Yield is higher than my comfort level but the company did make progress on revenue, net income and free cash. Still more work to be done.


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## londoncalling (Sep 17, 2011)

deleted. duplicate post


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## agent99 (Sep 11, 2013)

AT&T is the only US stock I own. And I don't own much! 
I have it in my RRIF where I have a US$ section mainly consisting of foreign ADRs and two Canadian stocks that pay dividends in US$. Purpose is to generate cash flow in US$ that I draw to help pay for Snowbird trips. All holdings are dividend payers . Have had nice gains across the board except for Shell.
I don't recall what made be buy ATT. Probably attracted by dividend and stock price matched funds available. Besides, when in USA I am a customer! 
Anyway, thanks for the report. Glad to see stock is doing well.


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## My Own Advisor (Sep 24, 2012)

I have the same plans Agent. re: use some USD $$ dividends for travelling.

I'm not "there yet" for retirement but is your approach simply to withdraw USD RRSP $$ directly to USD non-reg. for spending?

Seems to make sense (to me) but I wasn't sure if all brokerages don't force some USD > CDN $$ conversion first. Would defeat the purpose of course.


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## agent99 (Sep 11, 2013)

My Own Advisor said:


> I have the same plans Agent. re: use some USD $$ dividends for travelling.
> 
> I'm not "there yet" for retirement but is your approach simply to withdraw USD RRSP $$ directly to USD non-reg. for spending?
> 
> Seems to make sense (to me) but I wasn't sure if all brokerages don't force some USD > CDN $$ conversion first. Would defeat the purpose of course.


We make the withdrawal as part of our annual RRIF withdrawal. The US$ are withdrawn as US$ and go into our unregistered trading accounts along with stocks & C$. From there we can transfer the US$ wherever we choose, but it goes into our US$ BMO account. From there it gets used to fund our BMO Mastercard! 

The only conversion that gets done, is in calculating the C$ equivalent for use in calculating the total withdrawal amount. We try to hit the MWR exactly. Stocks, US$ plus C$ cash. BMOIL calculates the exact amount of C$ cash required, based on the stock prices and the US$ FX rates on the day.


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## My Own Advisor (Sep 24, 2012)

Cool. Makes sense. 

Planning for the day when I can move USD $$ out of RRSP/RRIF and travel with USD $$ non-reg. for the same reasons. 

Is anything a tax headache at tax time? I guess not really, since all RRSP/RRIF withdrawals must be reported in CDN $$ equivalents anyhow. One or two RRSP withdrawals per year would have those rates defined easy


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## agent99 (Sep 11, 2013)

My Own Advisor said:


> Cool. Makes sense.
> 
> Planning for the day when I can move USD $$ out of RRSP/RRIF and travel with USD $$ non-reg. for the same reasons.
> 
> Is anything a tax headache at tax time? I guess not really, since all RRSP/RRIF withdrawals must be reported in CDN $$ equivalents anyhow. One or two RRSP withdrawals per year would have those rates defined easy


If you draw from your RRSP or draw in excess of MRW from RRIF, there will be withholding tax deducted. They would first convert the US$ to C$ in order to calculate the wityhholding. I did that once. I think I still received the full US$ amount and they used C$ cash in account for the withholding. But not sure exactly. No matter, it was just about $5k and there was no problem with it then or at tax time.

The way I described we do it earlier has no tax consequences. (Other than paying tax on our RRIF withdrawal at the max rate!) OAS clawback can kick in because withdrawals may put you in a higher bracket. No getting around that


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## londoncalling (Sep 17, 2011)

AT&T stock heads for worst day in 11 months as future dividend cut viewed as ‘somewhat surprising’ - MarketWatch 

As Alta said in post #49 Dead money. Going nowhere. Share price down today. The looming cut did not come as a surprise to me at all in fact I thought this was somewhat priced into the stock. the article indicates a desired payout ratio of 40-43%. I was unable to find its current payout on Reuters. Although I agree with the plan to refocus on telecommunications instead of old media, I am not sure I care to stick around for the changes to be implemented. If the article is correct the "resized" dividend won't take effect immediately. I find this odd as the announcement would have the same effect without any of the savings of actually cutting. I don't expect any price appreciation for quite some time. I placed an order for Verizon on Sunday( I see more value and upside) but my order wasn't triggered. Not sure if money will move from AT&T to Verizon. I haven't changed my price but am considering doing so along with the number of shares.


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## Boiler Room (May 4, 2021)

The current payout is about 60% but the 40 to 43% figure quoted is FCF after the spin off. (FCF is projected to drop from 26 to 20B) The spin off and dividend cut take place roughly a year from now. The spin off company will likely not pay a dividend in the short term, as it was stated that they will be focused on paying off their debt. I would like to exit the stock if an opportunity somehow presents itself. Too much negatively surrounding the deal at the moment. And I might add, AT&T spent the year telling us they were committed to maintaining the dividend.


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## londoncalling (Sep 17, 2011)

Boiler Room said:


> The current payout is about 60% but the 40 to 43% figure quoted is FCF after the spin off. (FCF is projected to drop from 26 to 20B) The spin off and dividend cut take place roughly a year from now. The spin off company will likely not pay a dividend in the short term, as it was stated that they will be focused on paying off their debt. I would like to exit the stock if an opportunity somehow presents itself. Too much negatively surrounding the deal at the moment. And I might add, AT&T spent the year telling us they were committed to maintaining the dividend.


Thanks for addressing my questions. Companies are notorious for assuring dividend sustainability up until the moment they cut it. I find the stronger the assurance the more likely the cut is imminent. I was excited by the positive response on Monday's announcement and had saw this as my chance to exit. I placed an order to sell expecting further enthusiasm. Along with yourself I would be curious to hear what sell price others would be seeking to exit. Not my style but could this possibly be a swing trade opportunity for those that feel the market has overreacted? I have minimized losses and turned losses into gains in the past by averaging down to sell the entire position on a short term bounce. Currently up on this one if I include dividends but as far as share price is concerned am sitting in the red.


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## james4beach (Nov 15, 2012)

james4beach said:


> I see that AT&T now has a 7.5% dividend yield, which itself should be a warning sign. But the total return is far more important.


Reviving an old topic, because now we can see how the story played out.

The AT&T dividend yield was well into 7% and 8% for a while. That was NOT a good sign.

And here we go. Eventually, business reality catches up. AT&T has cut its dividend. Now the 5 year return (total return) is actually *negative*. And even the 15 year return is just 3% annualized, total return including dividends. That's a terribly low return. The S&P 500 return in the same period is 10% annualized.

It's easy to find super high dividend payers but these stocks are usually not a great idea.


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## londoncalling (Sep 17, 2011)

Thanks James,

I agree that high yields are are good warning sign and total return is what really matters. Based on when you bought within the last 5 years, or 10 or 15 the total return may not mean as negative return. Regardless this sock has underperformed the overall market. When an investor stock picks some selections will outperform and others will underperform. At a certain point preserving a dividend streak is not sustainable if the company cannot achieve the desired results. The dividend cut from AT&T is still confusing to me. Not in the fact that it is needed but that it has been very unclear. It was announced five months ago (post 60) yet the company website still shows the payout at 52 cents 

AT&T Inc. | AT&T (att.com)


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## agent99 (Sep 11, 2013)

AT&T did not just cut their dividend as James suggests. The reduction is part of an overall restructuring that will only be completed next year. At that time the dividend will be cut, but shareholders will then own part of a the new merger between Warnermedia and Discovery. It may not be a good deal for shareholders initially, but could perhaps be down the road if the new entity is successful. 

More here: AT&T announces $43 billion deal to merge WarnerMedia with Discovery

BTW - I own about 300 shares of AT&T! May sell because they don't fit our portfolio and future is unclear.


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## james4beach (Nov 15, 2012)

agent99 said:


> AT&T did not just cut their dividend as James suggests. The reduction is part of an overall restructuring that will only be completed next year. At that time the dividend will be cut, but shareholders will then own part of a the new merger between Warnermedia and Discovery. It may not be a good deal for shareholders initially, but could perhaps be down the road if the new entity is successful.
> 
> More here: AT&T announces $43 billion deal to merge WarnerMedia with Discovery
> 
> BTW - I own about 300 shares of AT&T! May sell because they don't fit our portfolio and future is unclear.


Indeed, pretty hard to anticipate how this will play out, and what the net effect on (new) shares will be.

Very messy.


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## agent99 (Sep 11, 2013)

I sold on a hard stop today. Now have some US$ in rrif without a home.


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## james4beach (Nov 15, 2012)

agent99 said:


> I sold on a hard stop today. Now have some US$ in rrif without a home.


What are you thinking of doing with the USD ?

I'm about to receive a big IRS refund. Wish they did this months ago when the exchange rate was higher. Now I'm debating converting to CAD now, or holding as USD. The problem is that if the commodity / oil rally continues, the USD might keep falling.

Global traders treat the CAD as a commodity currency, so a commodity bull market likely means a strong CAD.


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## agent99 (Sep 11, 2013)

james4beach said:


> What are you thinking of doing with the USD ?


It's not that much, so will probably leave it as cash and withdraw as part of our annual rrif withdrawal. Maybe use it for a snowbird trip if the US ever looks like a safe place to visit. Otherwise, buy a US$ etf that can be easily turned into cash. Which one? No idea at this point!


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## londoncalling (Sep 17, 2011)

Discovery and AT&T Close WarnerMedia Transaction (tmx.com) 

As a result of the spinoff share price down about 20% in exchange for .241 shares of WBD. US telcos are much different than their Canadian counterparts which have higher margins based on higher rates for customers. I still have a small position in Verizon but sold AT&T back in January. My return on US telcos has been almost flat whereas my return on Telus and BCE have had share price appreciation and growing dividend payments for years.


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