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AT&T's Recent Dividend Highlights Its Strength, But Options Trading Offers More Potential

Apr. 05, 2021 1:55 AM ETAT&T Inc. (T)T.PR.A, T.PR.C, TBB, TBC46 Comments


  • AT&T had a spectacular 2020, despite the lack of reaction from the market. That's despite almost $45 billion in net investments into the business.
  • The company's dividend is strongly secure at nearly 7% annualized, and the company plans to redirect additional cash into debt repayments.
  • The company has the potential to drive consistent and reliable double-digit shareholder rewards despite market conditions, making the company a reliable investment.
  • I do much more than just articles at The Energy Forum: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »
AT&T Advises Its Over 200,000 Workforce To Work From Home, As Coronavirus Continues To Spread
Photo by Ronald Martinez/Getty Images News via Getty Images

AT&T (NYSE: NYSE:T) is a company we've consistently discussed, especially its record-breaking spectrum auction recently. Followers might wonder why we continue to discuss the company, despite its stagnant price movement. However, our answer is simple:

The market can remain irrational

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This article was written by

The Value Portfolio profile picture

The Value Portfolio specializes in building retirement portfolios and utilizes a fact-based research strategy to identify investments. This includes extensive readings of 10Ks, analyst commentary, market reports, and investor presentations. He invests real money in the stocks he recommends.

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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.

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Comments (46)

Queen Anne Investor profile picture
Nice article. Not sure about the selling put strategy. You miss out on the dividends and the potential big price appreciation. In stable high yielding large caps the option prices are too low to make the risk worthwhile. Just buy the stock and collect the dividend.
I never could understand the hype around HBO Max. It comes included with my ATT high speed internet, but I rarely watch it. Occasionally they'll have a new movie release, but is that a reason to subscribe? How many times do you want to watch Godzilla vs. Kong (if ever)? I would simply never pay for it.
SPAC lover profile picture
@Tykob if everyone likes you, Netflix goes belly up. there are online companies business model based on people watching other to play online games, so-called esports. are you watching that? guess no.
SPAC lover profile picture
@Tykob maybe you can let me watch it for you
nerd_rage profile picture
@Tykob There's the HBO back catalog, new HBO shows, the Warners back catalog, etc. But we still have no real inkling of how much traction HBO Max has gotten.

How many HBO customers have activated a free account, how many people are watching free accounts that come from ATT high speed internet, and how many people are actually forking over $15/month that they otherwise would not be spending? That last figure is by far the most important in gauging the actual success of HBO Max.
I just keep dripping the dividend every quarter. At around a 7% dividend, I should have double the shares I currently own in close to 10 years.
@Hopeful17 I think of it as a substitute for money I used to keep in cd's..no principal accretion expected but a very nice interest payment...
@Hopeful17 Exactly, good reason to own AT&T
@Hopeful17 There are alot of people that do not understand dividends. they would rather options trade hoping a quick return and often fail. Dividends make you money when you sleep.
AT&T owns CNN. Dump AT&T. Promote honest journalism!
SPAC lover profile picture
@San Marzano making money, not politics.
@San Marzano honest journalism is awesome. I’m guessing you don’t follow much.
@San Marzano Goodbye.
I have doubled down on T and continue to add every month. It’s worth buying to collect the 7%.
I prefer selling covered calls on my T shares. I sell one month out, at $1 to $2 above market. Since there is almost no chance of the stock appreciating $2 in a month I simply pocket the modest call premium at expiration to supplement my quarterly dividend.
@jnpfl I try to do the same, but more conservatively by going further out of the money to lessen the risk of getting called away and lose the dividends. But, if they do get called away, I'll look for the next opportunity to sell puts to collect premium and not afraid of getting assigned.
@jnpfl I own a fair amount of T and usually don't sell calls against it. However, I felt a month or so ago that the tide was turning in T's favor and the technicals support it. So I bought some Apr 16 $29 calls, something I usually don't do. With the dividend coming up, unless we have a big drop in the next two days, I'll be exercising them on Wednesday to capture the dividend. There will be a disappointed T option seller when he gets the exercise notice that he won't be getting the dividend.
SPAC lover profile picture
@msbreb1978 frankly, with the low beta, there is not much benefit buying T's short-term call. I am sure you would get a better deal buying T stock at the time of your buying T April call. You would pay less.

Exercise on Wed. is slick. Sometimes, you have to pay attention to ex. dividend date.
SPAC lover profile picture
It is actually very bad idea to sell $30 put.

You get about 3% upside vs. owning T, with all the down side.

For high dividend stock with low beta stock, that is the wrong thing to do. The author is too simple, and too naive.

If anyone like T dividend, better way is to sell it's weekly put at 29. 28, 27. T is range bound. This way, you bought T at lower end with additional put money. Or you get free put money. Then you can sell a coveted call at 35 , 40, 45 depending on your time length.
Peter Pham Wesley profile picture
@wit witty I’m a very similar thinking with what you wrote. AT&T has been trading at such a tight range for sometime now.

The only down side is, unless it’s a strike price that is very ITM, the weekly premiums tend to be kind of smallish for AT&T.
SPAC lover profile picture
@Peter Pham Wesley true. but free weekly money is better than nothing. however, you do have to use a brokerage that does not charge any options trading commission or contract fee. only a few do that. send me a private message. I can refer you to it.

even if it is 20 cents. 20 cents X 50 weeks=$10.

i bought T at $28, $27.5, $27. when you sell a put, you tend to buy T on its lower side. T's solid support at $27 gives you downside protection. When I sell covered calls, I go the bigger gap, such as $2 to $3 in a weekly expiration so I know I would not give away T easy. This way, you could easily get 20% return and still keep T stocks.
It is a Top profile picture
@wit witty

"even if it is 20 cents. 20 cents X 50 weeks=$10."

But it has to be cash secured.

That's $10 at a strike price of $27 on $2,700 cash for a year. That's 0.0037 return, or .37 percent.

Less than 1% to tie up at best $2,700. You would do better with a savings account.

"This way, you could easily get 20% return and still keep T stocks."

I don't see how that would work.
HBO Max is a sleeping giant and this year its gonna dump on disney and netflix my prediction. Look at the movie line up. Matrix 4 and Dune are just the beginning
nerd_rage profile picture
@BigTheta Matrix 4 and Dune have the potential to be new/revived movie (and HBO Max series) franchises. Let's see how good T is at entertainment brand management. We should be seeing Dune 1, 2, 3 etc and spinoff series on HBO Max if they are doing their jobs.

Regardless, for HBO Max to threaten Netflix or Disney+ in any significant way is a very tall order. Let's give them a simpler task: don't screw up Dune.
IV is incredibly low, you dont want to sell puts, you want to buy calls.
Rainy Decade Investing profile picture
@BigTheta yes, wrong time for selling long duration. Volatility expansion will put this trade under water.

OTM debit spreads have a higher probability of profit than a simple call purchase.
@Rainy Decade Investing True, less upside though
Rainy Decade Investing profile picture
@BigTheta it depends on what you want. a couple of low probability home runs (the long calls), or a lot of high probability singles (the debit spreads).
polymath ryan profile picture
I sold a put on 30 when it was at 27 a few months ago. Good thinking!
Basit Saliu profile picture
AT&T's gaming business could become a big growth area in future when 5g and HBO Max are already paying off. AT&T's sport business is also another one to look out for. AT&T have 6,000 owned stores they could convert that into WB stores for merchandise etc. AT&T is so fortunate to own Mobility and WarnerMedia. AT&T FCF and OCF is so huge they will get through these hard times. Go T to $50 by 2024.
@Basit Saliu I hope they don’t sell the Gaming unit.
V long T
Basit Saliu profile picture
@HM JOSHI T is no more selling the gaming business nor the sport business.
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