Is AT&T A Good Holding For Dividend Growth Investors?

Nov. 13, 2015 5:39 PM ETAT&T Inc. (T)30 Comments
Christopher Price profile picture
Christopher Price
2.2K Followers

Summary

  • AT&T is not a growth stock. When a recent article looked at the price compared to the S&P 500, there is no comparison.
  • This price appreciation does not include dividend growth, however.
  • When adding in the dividend, AT&T still trails the S&P, but it provides a good deal of income.
  • The solid income stream makes AT&T a great cornerstone stock for a dividend growth portfolio.

As an investor in AT&T (NYSE:NYSE:T), a couple of recent articles on Seeking Alpha have caught my attention. The first cited an article on Investor's Business Daily that correctly pointed out that AT&T's price had only appreciated around 19 percent over the past 20 years. This trailed the S&P over the same time period, which was up about 256 percent. The second argued that AT&T's dividend was a "red herring." These two articles caused me to wonder what a dividend investor might have gotten out of their investment over the past 20 years, as I'm hoping to get paid for the next 20 years after my initial recent investment.

AT&T is definitely not a growth stock, and investors who invested hoping to see a big run-up in the stock's price around 1995 would have been increasingly disappointed over the long run. What these numbers do not take into account is the power of the dividend. When dividends are reinvested, the return of the S&P 500 would look more impressive than the 256 percent return stated. AT&T would look better as well when taking its ever-increasing dividends into account.

The "Real" Returns for AT&T Investors

I went to the AT&T investor website to get some information on the dividend starting in November 1995 to the present. The first dividend received would have been $0.4125. A 2-for-1 stock split in March 1998 doubled the number of shares that an investor would have held. There have been no splits since, but the post-split dividend has grown from $0.23375 to the current $0.47 over this period of time. The current dividend yield is approximately 5.75 percent, which is pretty high for a stock that's a component of the S&P 500.

Over the past 20 years, an investor who bought one share of AT&T would have

This article was written by

Christopher Price profile picture
2.2K Followers
Chris is a history instructor at a community college. He is building a dividend-paying stock portfolio that is hopefully low on the risk scale to build up income for his golden years.

Disclosure: I am/we are long T. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am not an investment professional. Please make sure to perform due diligence before investing in equities, as losses up to all capital invested can occur.

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