AT&T (T) has declined 7% since the announcement that the Justice Department is looking to block the AT&T/T-Mobile merger. This decline is offering investors an opportunity to acquire shares with a solid 6% dividend. AT&T is a great company that not only provides investors with a great dividend yield but a chance for appreciation as well.
Here are some highlights I like about the AT&T business:
- 9.5% increase in wireless revenues, with a 7.4% increase in wireless service revenues.
- Total wireless subscribers increased 1.1 million in the second quarter of 2011. AT&T now has a total subscriber base of 98.6 million.
- Wireless smartphone sales increased to 70% of total post paid sales, in the second quarter of 2011. This was the highest percentage in the history of the company.
- Mobile computing subscribers increased 545,000, almost double the amount when compared to the second quarter in 2010. Mobile devices are a huge growth opportunity for wireless carriers and will continue to drive growth. AT&T only has 4 million mobile devices on its network.
- Second quarter operating income was $6.2 billion, an increase of $100 million when compared to the same quarter in 2010. AT&T had a net income of $3.6 billion. This came in a little less than 2010 which mainly had to due to an increase in expenses.
- AT&T plans to reduce debt and return value to shareholders through dividends. AT&T has reduced debt by $3.4 billion over the last 12 months. AT&T has also paid $2.5 billion in dividends during the second quarter of 2011.
I understand that AT&T may ultimately have to pay T-Mobile $3 billion in cash as well as another $3 billion in assets due to the breakup fee that was negotiated. This has been factored into the shares and should not be a big drag on the company going forward.
AT&T has a steady business with great prospects in the wireless side of the business. Wireless accounts for 50% of the business and will continue to be a big part of the business. Even though AT&T has seen a drop in net income due to an increase in expenses, I don't see the dividends being endangered. I'm bullish on AT&T and feel that pullbacks provide investors a great opportunity to invest in a company with a solid dividend.
Disclosure: I own wireless stores that directly compete with AT&T wireless