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AT&T: A High Yield Opportunity At A Bargain Price

May 30, 2023 2:55 AM ETAT&T Inc. (T)AMZN, DISH, RSP, SPY, T.PR.A, T.PR.C, TBB, TBC, TMUS, VZ44 Comments


  • AT&T (and the other telecom giants) has taken a hit on the back of potentially stiffer competition from DISH.
  • However, T remains cheap even despite this new potential headwind with an attractive dividend yield.
  • The FCF is concerning, but it doesn't guarantee a dividend cut as long as they don't revise FCF guidance significantly lower.
  • This idea was discussed in more depth with members of my private investing community, Cash Builder Opportunities. Learn More »

AT&T To Merge Warner Media With Discovery

Justin Sullivan

Written by Nick Ackerman. A version of this article was included in our Cash Builder Opportunity weekly options expiration update originally posted on May 27th, 2023.

AT&T (NYSE:T) and the other telecom giants Verizon (VZ

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Comments (44)

Any seeking alpha author promoting T is a shill, sorry if that's rude. This is an all-time bad investment. The ratio of pumped articles to stock performance has to be an all timer to the bad!
Cash Builder Opportunities profile picture
@sixthspeed thank you for sharing your thoughts! I have no association with T except for being long the stock as disclosed. I'm sorry you seem to have lost money and are now frustrated.
Henry98 profile picture
@Cash Builder Opportunities
Calling you a shill is silly and I really like your calm response.
I own shares, none too happy, but appreciate you overall. May not add. T makes me nervous as accusations of poor management have plausibility and they are just in a tough industry. The cost of new spectrum is killing everyone.
Skeptical about both T and VZ.
Both have landlines which is costing them, and many people do not use
them anymore.

Options could be a good alternative.
Cash Builder Opportunities profile picture
@katmandu100 quite true! I've never had a landline before. I went straight to mobile. Businesses are seemingly the only ones that would be keeping that side of the business alive. Thank you for the comment!
John Cofran profile picture
So to what extent is Starlink a threat over time? If Musk offers his service widely, wouldn’t many people switch ultimately?
Cash Builder Opportunities profile picture
@John Cofran that would certainly seem like more competition! Latency and speed compared to cable and fiber are still worse, so for now it seems like it isn't a big threat.
@John Cofran If you mean Starlink's existing broadband, it's not intended to compete in areas with existing broadband service so not too much threat. It's not as reliable, less capacity and more expensive than fiber. Starlink is great for remote areas globally including ocean coverage.

If you mean Starlink's plans for mobile service to existing phones, that would compete with ATT/ASTS SAT based mobile service in the works. Is possible that Starlink may deliver texting first but ASTS is ahead with voice. Hard to say when we see this but good chance eventually. This will augment terrestrial cellsite gaps, not replace cellsites as there are SAT capacity limits and coverage indoors, especially multiple floors.
dimage54 profile picture
I own 1,700 shares of T at an average cost of $24.50/share by counting dividends. I sell leaps at $25 strike hoping one day it will be called away at that price. Been collecting dividends for years so if I sold it today I would jus about break even.

Terrible management, terrible customer service, and in my opinion an average product. I continue to hang on but hope to eventually get completely out of this stock.
@dimage54 sorry for your loss. I have too much T relative to my portfolio as well, although much less I'm absolute. I was tricked as a young investor by seemingly endless overly optimistic seeking alpha articles. However the responsibility is my own. However I would like to shame any author that continues to pump this stock. All time bad management. The board needs to fire leadership then be fired by the new leadership.
Catmanrog profile picture
Nick, I follow and enjoy most of your articles. T, for me, is done, sold, and like a cheating, poor cook, ex-wife… even this new “facelift” will never be attractive to me. It’s about trust and predictability. I sold long held T shares, per business plan, and disconnected my T landline and streaming as well.
No More T for me. I DO enjoy your CEF articles much more ! Best Regards 🐾
Cash Builder Opportunities profile picture
@Catmanrog thank you for sharing your thoughts and kind words! I held T for a considerable number of years and sold when they adjusted the dividend. Now I use it for writing options, which I think around this price is attractive. Of course, only time will tell and they are certainly on a long term slide lower that they can't seem to stop.
Here's a key Point behind AT&T, Verizon or any high-yielding stocks. Once interest rates start to drop which will inevitably happen people will come back into these stocks even with the risk of free cash flow decreasing because they'll still want the yield. That will lead to the increase in the stock but obviously those who lock it early will get a great yield. You can wait till later but you'll probably miss that transitional period where you can get the opportunity of a high-yield now. Life without risk get you nothing
Cash Builder Opportunities profile picture
@CounterInvestor I would agree. Thank you for your thoughts!
Thanks for your time and analysis. ATTs stock is clearly on a slow decline and has been for many years. It is, essentially, a sinking ship. Do yourself a favor and answer these questions before buying any too-good-to-be-true dividend stock. Are ATTs Cash Flows positive or negative? What’s the debt load of ATT? What are the growth opportunities for ATT? Over the recent past has ATT raised or cut its dividend and, if so, why? What about the long-term trend for the stock, is it up or down (what story does it tell)? Does ATT have a competitive advantage? In short, are the dividends safe? Having said that, would you be better off buying 5.5%+ treasuries/brokered CDs for your portfolio of which incidentally are guaranteed or buying a sinking ship such as ATT for its dividend? ATT stock is cheap for a reason and the smart money has voted with its feet.
Cash Builder Opportunities profile picture
@Gustave Eiffel good thoughts! Thank you for taking the time to comment your input!
Bous Investments profile picture
@Gustave Eiffel Tax wise, a qualified divi is superior for me. The treasury bills or CD's are taxed at ordinary tax rates. That said, I wish that I had never invested in T and VZ. I thought that everyone had cell phones and that this would be a safe investment......wrong.
@Bous Investments Most everyone does have cellphones but clearly the competition is increasing and service has become a commodity. There's really 5+ players now as CableCos gain mobile momentum and builds own networks. T has legacy copper and losing legacy TV subs and enterprise losses, any growth would need to more than offset these.

There's nothing T has that stands out as a competitive advantage anymore. Fiber is their best play but cable is upgrading to multigig at 1/5th cost, which will put pressure on fiber profits. T leads with IoT connections but the revenue is not much compared to phones accts. ASTS SAT coverage filling gaps would be a boost but that should still be considered speculative.

Watch for increasing churn across all telcom over next couple years, both mobile and broadband. Would expect a lot of hopping around.
Code Talker Market Analysis profile picture
$T is a hold or sell, depending on your risk tolerance. I believe FCF for the year will not meet management's guidance. Management is not good at even near term guidance, why should they be trusted with capital to get 1 year guidance right in the face of a Fed-induced recession?
I view T as being $10 dollars undervalued currently. But, I see growth
with its Government/Fiber/AI infrastructure advantages and believe it should
be at near $40 dollars a share in two years.
@TheWallStreetKid Low $20s may be plausible but over that not looking too realistic given increasing competition at every layer (for all telcom). CableCos are upgrading to multigig at 1/5th the cost of fiber and has mobile momentum. AI should help with efficiencies but not necessarily notably improve revenue. Govt spending scaling down, goes in cycles and seeks deals.
Seriouspatt profile picture
The current financial climate has witnessed troubling trends in the telecom industry. Share prices of numerous telecom companies are showing alarming declines, with many trading at a mere fraction of their annual revenues.

This trend raises a pertinent question - when will the reversal occur? Telecom companies, given their fundamental role in bolstering a successful economy, must eventually witness a bounce-back.

But to anticipate this reversal, it's vital to understand the key drivers behind this downward trend. From technological advancements and regulatory changes to shifts in consumer behavior and market competition, a myriad of elements could come into play.

I think telcos are out of favor and it's probably not a bad time to build positions here.
T is a huge disappointment for the past 15 years.mid they don’t hit the FCF projection of 16 billion it will mark yet another missed forecast and the stock will be pummeled. The Fcf target is essential as management has Zero credibility
dbchambers profile picture
@Jlexus1953 Management is weak; service is worse.
Cash Builder Opportunities profile picture
@Jlexus1953 fair thoughts! Thank you for sharing your opinion!
Cash Builder Opportunities profile picture
@dbchambers is the customer service weak or the service of their phones? I have a few friends with AT&T service and they don't seem to complain. I use Verizon personally.
Income4ever aka Cyclenut profile picture
Hi Nick
I feel that while Vz and T are fairly stable there are better, much better high yield opportunities out there ..
Just can't see any reason to hold either ....
Cash Builder Opportunities profile picture
@Income4ever aka Cyclenut understood! Thank you for your thoughts, as always!
Income4ever aka Cyclenut profile picture
I like Epd, Mplx, Et, Oke, Jepi, Jepq, Mo , Bti, Pm and a handful Bdcs
DISH doesn't have much breadth/depth to be as much a serious threat as CableCos, which have their own issues but ultimately more mobile sub momentum than DISH.

Cable will also become a threat to fiber as they upgrade to multigig (up to 10Gig) at only $200 per passing compared to $1000 avg for fiber. Cable will be better positioned to compete on price though have their own struggles with TV losses so will only do so when forced to.

TMUS is methodically going after small towns now county by county, with a rollout bundle that involves filling network gaps, adding a store and marketing. It's a pre-packaged rollout bundle that is working. They are grabbing FWA 5G home internet subs not on TMUS and convert some to TMUS mobile. They had low teens marketshare in rural/small towns but working up to 20%. I don't recommend investing in TMUS but they are truly a thorn in T/VZ's side and will get better at it. T's weakest spot is lowest midband 5G coverage/performance and TMUS will take advantage of that.

Potentially more churn coming with all carriers by 2025, both mobile and home broadband.
Cash Builder Opportunities profile picture
@user50232 thank you for taking the time to add your input!
crafool01 profile picture
AT&T has terrible management that in my opinion is only interested in themselves and their r own jobs. They have made stupid acquisitions and levered up the company and will cut the dividend at any time to get cash to feed their stupidity. Clearly,, I believe you should stay away from this stock.
Cash Builder Opportunities profile picture
@crafool01 thank you for sharing your opinion!
Buying it at this price.
15 is a strong support looking at 30 year support
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