AT&T (T) is among the largest providers of mobile telephone services in the world. It serves about 90 million retail customers in the U.S. The company provides telecommunications services and next-generation TV innovations to consumers, businesses, and other providers nationwide with the help of its subsidiaries. AT&T's mission is to provide technical innovations for its users and through next-generation advancements in services and operations. In 2011, Forbes listed AT&T as the 14th largest company in the world by market value and the 9th largest non-oil company in the world by market cap. Among the stocks listed in NYSE, AT&T currently ranks number 10th according to the market cap.
The demand for AT&T's Mobile Enterprise Platform (MEAP) is on the rise since 2011. More than 27,000 of its valued customers have already adopted its newest mobile applications. Revenue from that segment tripled in 2011. There is still substantial growth potential in this field. The number of worldwide enterprise mobile application and service users are expected to reach 600 million by the next decade.
AT&T received a leadership award last May 2012 for its Wi-Fi innovation during the 15th Annual Leadership Awards Ceremony. Wi-Fi connections of AT&T have started growing dramatically during the first quarter of 2012 with 626.4 million AT&T Wi-Fi connections. The Wi-Fi innovation is the strategy that AT&T's senior vice president revealed to keep its customers connected anytime, anywhere, and whenever they need. AT&T assures the fast, reliable and convenient connection of its Wi-Fi. Additionally, AT&T is also optimistic that its Wi-Fi strategy will continue to skyrocket this year. The company also collaborates with McDonald's (MCD) to offer free Wi-Fi connections to burger lovers.
During February of 2012, AT&T started offering its Enhanced Push to Talk (PTT) solution. Since it has been particularly appealing to its users, the positive impact led AT&T to extend the free trial to its customers. In addition to that, AT&T has planned to offer five smart phone choices to incorporate with its enhanced PTT.
The two-in-one purpose of Toggle has never failed to impress its users. The latest version of Toggle can now be used on smartphones or tablets, including Android 2.2 and 3.X, and with virtually any service provider. The newest venture, U-verse has also been hugely alluring to the consumers. U-verse remarkable features are its fastest internet connection and widest cable service for televisions. All in all, U-verse garnered 6 million subscribers within a year.
With a current stock price of $35.7, AT&T has consistently provided capital gains to its shareholders. The company offers substantial dividends, which have been growing consistently year after year. The company also invests heavily in new generation mobile infrastructure. The depreciation of existing equipment may suggest an expensive investment for the company. However, looking at the steady cash-flow from customers, the stock looks like a bargain. The company not long provides consistent dividends, but also substantial capital gains.
The past dividend history of AT&T shows consistency of payments and generosity to its shareholders. Since 2007, dividend amounts have been increasing from $1.42 to $1.72 in 2011. AT&T declares and gives out dividends every quarter. With a yield of 4.9%, AT&T offers one of the top dividends in the market.(click to enlarge)
2011 was a healthy year for AT&T. Despite the decline in its quarterly sales growth, the figure derived still creates an increment when compared to its previous year. AT&T's growth machines are its wireless and wire line data; managed services; and its newest technology, the U-verse.
The company's cash flow is pretty stable. The stock is currently trading at 6 times the cash flow. Its receivable turnover is only 9.31 times the average receivables. The latest debt over equity of 0.56 is lower, compared to the last quarter of 2011, which is 0.58. However, its financial leverage has been consistent at a bracket of 2.0. Therefore, AT&T's debt issues are manageable, and its excellent leadership can keep up with its debts.
Every corporation has an issue. A minor downturn is now on the hands of AT&T. It failed to acquire T-Mobile due to federal blockage of the takeover, which cost the shareholders a bill of $4 billion. Tough competitors such as Verizon (VZ) and Sprint (S) are also a threat, but the overall growth in the telecommunication industry has greatly benefited the operations of AT&T. Among the big three, Verizon has greater edge in competing closely with AT&T, but the threats are not worrisome to AT&T. On the other hand, there is reasonable doubt that Sprint will be able to sustain its competitive edge, as it keeps bleeding cash. The management's bold move to be the first to introduce Apple's (AAPL) iPhone to its customers proved to be a highly profitable one. Currently, AT&T is the leading provider of iPhone users.
Data by YCharts
AT&T's outstanding performance for the past years has left its competitors lagging. Needless to say, AT&T stock is still worth the investment. Its stock price is increasing to its full potential. But the company consistently improves the value generated by its activities. While the stock looks more or less fairly valued, I think it is a safe haven for the long-term oriented investors. Its fast growth has gone out of its competitors' control. AT&T's management has indeed executed the best strategy for its company yet. I expect the dividends to grow along with the company's user growth. At the same time, I also expect the shareholders enjoy a modest capital return. Combines with the capital gains, and nifty dividends, the shareholders will probably enjoy double-digit returns over the next 5 years. That is why I think AT&T as a dividend pick for the next 5 years.
Disclosure: I am long AAPL.