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Rarely Does AT&T Give You This Opportunity

May 05, 2020 1:58 AM ETAT&T Inc. (T) StockT.PR.A, TBB, TBC154 Comments


  • There are some possible revenue catalysts coming in the way of HBO Max, a management change, and some insider buying.
  • By all accounts, backing out COVID-19 issues in March, Q1 was about as expected.
  • There will be real hits to revenues and cash flows in the next quarter or two.
  • Even with a massive hit to cash flows, the dividend payout ratio would be screaming safe.
  • A safe 7% yield is not easy to come by.
  • Looking for a helping hand in the market? Members of BAD BEAT Investing get exclusive ideas and guidance to navigate any climate. Get started today »

Prepared by Tara, senior analyst at BAD BEAT Investing

Stocks are going back on sale, as they have taken back a lot of gains from the last two weeks. This consolidation is supremely healthy. Friday's (May 1st) stumble turned what would have been a winning week into a losing one, which was a disappointment to be sure, but it is giving investors a chance to scoop up opportunities. Although we turned bullish at the end of March and issued a series of buying recommendations, our bullishness has waned a bit in the last week. We have said repeatedly that it is not necessary to chase gains. That is usually a loser's strategy, and we aren't having it. The selloff to end last week is not a reason to panic yet. A little weakness now may ultimately be a good thing, letting stocks catch up with what's been relatively indiscriminate optimism. There's room for a little more selling, in fact, before stocks suffer too much of a blow to reasonably recover. That idea certainly blows the whole "Sell in May and go away thing" out of the water this year.

This is one of those years, however, where expecting history to steer stocks might be a bad strategy, because we are in unprecedented times. But one name is committed to its dividend. One name is still covering its dividend even in these unprecedented times. That name is AT&T (NYSE:T). There are some possible revenue catalysts coming in the way of HBO Max, a management change, and some insider buying. If we set the COVID-19 impact aside for a moment, the first quarter was pretty much what we had expected and was decent. All things considered, we still love buying the stock in the $20's with a safe dividend that

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This article was written by

Quad 7 Capital profile picture

Quad 7 Capital is a team of 9 analysts with a wide range of experience sharing investment opportunities for nearly 12 years. They are best known for the February 2020 call to sell everything & go short, & have been on average 95% long 5% short since May 2020. The broader company has expertise in business, policy, economics, mathematics, game theory, & the sciences. They share both long & short trades & invest personally in equities they discuss within their investing group Bad Beat Investing, focused on short- & medium-term investments, income generation, special-situations, & momentum trades. Rather than just give you trades, they focus on teaching investors to become proficient traders through their playbook.

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Analyst’s 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (153)

craftbrewinfo profile picture
In at $28.42 and 7.28% dividend. I've been very critical of T the last few years, but finally bit the bullet. The "safe dividend " is what got me. After this corona virus lockdown nonsense, I have come to realize that companies that can survive and even thrive during a black swan like this ( and a self induced Government one at that) it has a place in my portfolio
In at 27.92 today. The great thing about T is that not only does it pay a high, safe dividend...the chance for significant PPS appreciation is there at current valuations as well.
arok79 profile picture
@T-Trader99 just be careful when deflation hits. that debt load will be crushing to T.
Deflation is unlikely when we print $5T in stimulus this year.
@Josh Swanstrom
If there is even a 1 in a million chance of deflation the Fed will start buying financial assets at 1 Trillion a month. When it runs out of bonds it will start buying artwork from banks at 100 million a piece (LOL).
LazyGringo profile picture
Oh yeah here we go bouncing off the bottom which is 28-29. I expect to be back in the mid 30's soon. Buy hold and expect the dividend to keep being paid.
Basit Saliu profile picture
Time Warner f**ked up AOL, now it is doing the same to AT&T...I am glad Apple or Amazon did not buy.
LazyGringo profile picture
Time-Warner-HBO was and still is the #2 Hollywood studio with the potential to be #1. All studios have peaks and valleys depending on release of certain megahits or bombs but the biggest hit ever was not a theatrical film, it was Game Of Thrones and Warners Lord Of The rings isnt far behind. PLus Disney may have Marvel and Star wars but Wonder Woman and DC comics isnt chopped liver and Star Wars and a lot of the Avengers stuff seemed played out. Warners TV has been #1 in network series for a long time. Also despite the rightwing and Putin trolls attacking it, CNN remains the #1 news network on earth, Turner is great including with sports and HBO wins during this crisis just as much as Netflix does, Directv too. So if you fold all that into one you get one of the top three streaming video services. And right now the most impressive show on streaming and cable is WESTWORLD. Just staggering sci fi quality. Bottomline, T did not blow it with Warners at all, they made a great buy. They did blow it with directtv but that was priced in and written off years ago and the bleeding seems to have stopped. Without directv btw I think this would be $50 dollar stock like VZ. And if we can get back to 38 or so, the dividend will be more reasonable again and still one of the best and most secure available.
jakefountain profile picture
@LazyGringo Dude you just do not get it on the Direct TV deal, one of the worst deals of all time. They still have the debt and are still paying the price so it is not written off.
LazyGringo profile picture
I know, but the Directv deal is what, 10 years old or something? and without the drag of that, where would T be now? 50? All I am saying is that is very much priced in and I am tired of bears talking about it. They make it sound ike T is going out of business. PLus interest rates have never been lower and they can cover their debts and dividends. T is also converting a lot of those DirectTV customers new into bundled deals with phone, internet, wifi, landlines whatever you need. And so DirectTv is getting cheaper with all kids of goodies thrown in to entice people not to switch. I have it at home and used to pay $109 a month for a premium package. Now I pay $70 for the same plus get internet, phone and free NFL games for the coming season. That $70 also includes what would be Viacom, Peacock, HBO, Sony-MGM, Warners, AMC etc. so the only thing it doesnt give you are original shows by Apple, Netflix, Amazon and Hulu pus some Disney kids content I dont need. So yes directtv was a huge overpayment and bad timing but it is more than priced in already, not a complete loss and there are still plenty of us using it who dont want to switch. Plus, you dont really save that much by cut and pasting 3-4 other cheaper deals together. And during this stay at home lockdown period everyone needs all the shows they can get. After two months Netflix is pretty much spent for favorite shows. They cannot replenish with new shows fast enough. Same with Amazon and Apple so I have them all now except for Hulu and Disney at less than I used to pay directv, plus internet access. and you can add in cheap phone service too and put in a landline if you want one very cheaply. Plus on the internet I can watch youtube for free using adblocker to avoid the annoying ads. So I never run out of entertainment and news. Bottomline, T is one of the big two in phones and internet and one of the big four in entertainment, and will stay that way. Plus, they did not pay too much for Warners-HBO, they got a pretty good deal. A better deal than disney got for Fox. And next year comes 5G which is a big boost.
I know this is not the point of the article, but come-on.

"We were eyeing $28 billion for the year 2020 in free cash flow, thanks to the boost from WarnerMedia as we entered the new decade back in January."

Contrary to what the majority of the population thinks, new decades, new centuries, new millenniums etc. start in years ending in "1" not "0". The next decade does not start until Jan 2021.
Investing With Confidence profile picture

I assume you included it for irony value?

Yes Jesus Christ is defined as being born in the Christmas of the year BC 1, after which the year was AD 1. There was no year zero.

Therefore the first decade is AD 1 to 10, etc and the present one 2001 to 2020.

So while pointing this out that technicality, you left me this new feature to point out.

The plural of millennium is millennia.

Ok. Now I have to jump in. A decade is just 10 years... Any 10. So "The 90s" was absolutely a decade and the 1900s was absolutely a century. It just is a different time period than the 20th century. Which did start in 1901.
allday1234 profile picture
It's not really that important and has nothing to do with investing, so what's the point?

LazyGringo profile picture
Agreed, especially below 29 but even below 32 this is a steal and a great retirement income stock.
Pts117 profile picture
VIAC results much stronger than expected... a huge knock on T (aside from debt) was their media business and the impact from COVID... could be window into the future of T's media business results?
ArtfulDodger profile picture
Debt, deadly debt. The only thing that has busted out more companies than debt is the Federal Government. You can see it in action as I write, after having busted out perhaps hundreds of thousands businesses by slamming shut the nation's economy, except for eight states that refused to go along with it.
The debt is what I fear about T, especially during the current times.
LazyGringo profile picture
If T management agreed with you they would not have just paid their 7% dividend and would have cut it. Instead, I see a strong future for T and I am so sick of hearing about Directv. That overpayment was priced in years ago. Without it, the stock would be over 45. And no time in history has debt ever been so cheap, nor internet wifi useage so high.

The Federal government did NOT.......let me say that again, did NOT "slam shut the nation's economy". The closures were done, correctly and effectively in my view, by the states' governors.
allday1234 profile picture
@Mike Slattery
I totally agree with you and unfortunately we have no way to compare it . Everyone closed up the shop and business as usual and under the circumstances I believe that as much as it hurt it was the correct thing. I have seen the reopening occur and believe that in some ways there is an overreaction in how each business does it but is their business and they can make the decisions and not me.

I don't trust any company's dividends during this Pandemic. And, when Management says: "Trust us, the dividend is safe" -- I'm looking for the Exit.
Throwing Ketchup profile picture
Look for the exit or the K-Y; those are the only two options.
Donggle profile picture
@combatcorpsmanVN you dont have to look for the exit, just brave enough to take the lose and walk out of the burning building.
I've already left the bldg and with T's toxic debt schedule, I won't be back. Dividends are nice but not when there are many other companies with dividends but w/o the staggering debt load.

I don't know or care what, if anything, T does with handling the debt service, I just don't want to have my money with a Company that has a hopeless track record piling on debt.

GLTA that believe in T.
@ Quad 7 Capital


What a trainwreck this is looking to be for AT&T

Complete embarrassment and evidence of the pervasive operational incompetence at AT&T/Warner Media

Notice how SA still has not posted this article.

Traditional AT&T Bulls-at some point you need to acknowledge the failed Warner Media acquisition.

5 hours and running since posting this Bloomberg article citing consumers’ negative take on HBO Max (especially the high price for the digital channel).

5 hours and @ Quad 7 Capital has NO Rebuttal....

Seriously @ Quad 7?

You are just going to fold?

Guess there was no due diligence on your part.

5 hours and SA STILL will NOT post the article/note from Bloomberg...credibility check SA.

Keep this in mind AT&T bulls. Remember you are not a monopoly anymore.

AT&T is wearing no clothes

Majority of sycophant financial media and AT&T bulls will not call T out.

Avoiding AT&T stock- not a fan of poor operators, especially arrogant operators.
Booban profile picture
@Cash Flow Seeker im a hopeful bull, but concerned T doesnt know what it is doing. Yeah, opening a new service with too high a price seems like a failure in economics 101.
LazyGringo profile picture
Are you actually short T at what is the lowest price since the 2008 collapse? if not, then why criticize a stock whose price is now so low all imaginable bad news is priced into it? Especially after they just beat estimates and have a very low PE of 8. I really dont see a downside here at all. Maybe it goesw to 27 but that would be a tremendous opportunity to load up. The stock just went down 30% and whatever troubles covid might cause T it also greatly boosts their viewership and broadband useage. Plus do I need to remind you of 5G? it is coming very soon now. I would cut the negative BS and load up. Under 30 is steal.
Chris Lau profile picture
$T is now $29. DIY Marketplace is not hurried to chase its dividend. It's on our income filter* Its entertainment division is now a drag on the balance sheet. Another better price awaits...probably in the $27-28 range. It's almost there.

* download income filter: https://bit.ly/2YE3w9s
horowitzcpa profile picture
@Chris Lau be patient and wait for the dividend cut - then you will get a ton of decent media assets for $22
Gosh, the drama here. Not many places to get 7% with low beta, risk. But this is about where T is going, DirecTV (dead), but HBO Time Warner lots of growth/upside. Waiting for 5G so I can ditch Comcast/Xfinity internet at home, lots of growth/upside for carriers here too. But wait VZ has Yahoo content (dead) and MCI (no/slow/growth). Debt and management is about the same. So I'm betting T will have higher margin bundling HBO Time Warner than VZ having to make deals with Disney which they can't control. Who can get more/keep more subs/arpu, my investment is T in this sector.
Donggle profile picture
"Waiting for 5G so I can ditch" but you got VZ for a carrier, the gold standard!
Agree and full disclosure, I am a VZ wireless customer, but unfortunately, the GOLD standard is more like BRONZE. I am also a Google Fi customer since my phones have dual SIM because VZ coverage in many places is pretty bad. I'm not saying T's coverage is better, but as an investment, my bet is vertical bundling content with access is going to be a winner over access alone. Since I'm near retirement, I'll take the slower growth with the higher dividend as today's dollars are worth more than tomorrow's with inflation coming after the recession.
Do you mean the "opportunity" to loose money year after year? I used to be a T apologist. Now I am just waiting for $32 so that I can get out for good. Why is T down 3% today? Just because it is T. DIS is up after reporting a terrible quarter. Nothing makes sense.
Why would you buy T at $29.00 when you can buy it for $22.00 a share and get an even bigger yield !

With the “stay at home” order in place, how is T not blowing out their earnings? This is the best case scenario for them to make money hand over fist !

T is last in 5G rollout.
T is last in streaming service pricing.
T is last in cellular subscribers, as VZ and TMUS are expanding their subscriber base.
T / DTV is bleeding subscribers and losing money.

Let’s recall that T management stated 1-2% growth for the next few years as they rollout these new services....and now they are missing earnings expectations...wow ?

Good luck ...!
Just used my margin for the first time to buy T at $29.12. I am transferring the cash over, but I didn't want to miss that price.
jakefountain profile picture
@JoshSD Never buy on margin. Ever heard of a margin call?
horowitzcpa profile picture
@JoshSD T on margin? Then you must feel silly about today’s closing price
I’d sell covered calls against the stock on margin. This is honestly not a bad idea considering the yield.
US Govt has $15+T in debt and people still invest in us....so....please be quiet about debt loads.
Donggle profile picture
@dandroidz they invest in "us" cuz they know they can squeeze you for the taxes.
Throwing Ketchup profile picture
The C.B.O. said on Friday that it expects the annual federal budget deficit to hit $3.7 trillion by the end of fiscal year 2020, add that to the $25 TRILLION already owed. That's over $75,000 for every man, woman, and child in the US. Think about that when you consider that most HOUSEHOLDS didn't have $400 in the bank going into this depression. Turn off the lights; we're done.
It's closer to $25 Trillion of Debt.
Investor since ‘73 profile picture
I’m here for the dividend and even though T may not be killing it, it’s not doing too badly in terrible times and the dividend is still easily covered. Parts of this diverse business may suffer but the wide base does make T more stable. If the overall market takes T down with it, I will add to an already full position. If it goes to 40, I’ll trim 20% to bank some cash and look to get back in later for less.
This strategy is very bulletproof.
Once 5g makes it on to cell phones etc will the
market rally and the stocks like vz marvel company t mobile jump
Donggle profile picture
T widows and orphans stock is a thing of the past.Self preservation keeps up hope and not facing reality!
No Magic there, just fake and who wants that .
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