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AT&T: Further Correction Likely Due To Multiple Headwinds

May 30, 2023 10:19 AM ETAT&T Inc. (T)WBD31 Comments
Bluesea Research profile picture
Bluesea Research


  • AT&T's stock has declined by over 20% since mid-April, reducing its PE ratio and increasing its dividend yield.
  • The company faces challenges in paying its massive debt and maintaining its dividend payout due to competitive pressures and capital investments.
  • Despite a high dividend yield, AT&T is not an ideal value play due to the massive challenges it faces in debt reduction, stabilizing free cash flow, and improving network coverage.
  • Any dip in the expected FCF will hurt the dividend payout ratio and could lead to another cut in the dividend, which is now giving a 7.2% dividend yield.

AT&T Stock Jumps On Strong Earnings Report

Brandon Bell

AT&T (NYSE:T) stock has declined by over 20% since mid-April. This has reduced PE ratio to less than 7 and increased the dividend yield from 5.5% to 7.2%. In a previous article in March 2022, it was

This article was written by

Bluesea Research profile picture
I have worked in the technology sector for over 4 years. This included working with industry stalwarts like IBM. I have done my MBA in finance and have been covering various blue chip stocks for the past 6 years. Having hands-on knowledge in the technology sector has helped me gain valuable insights into the ups and downs of this sector and predict winners and losers more accurately.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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 (31)

As a deep value dividend investor I continue to focus on safe high yield dividend payers selling far below their true intrinsic value. I don’t do what novice investors and speculators do buying bitcoin SPAC’s and overpriced tech stocks. It’s all about a safe rising dividend. Capital gains will eventually follow. That’s one of the mystery’s of our business. Both T and VZ fit the bill. They are on sale. They are not likely to cut the dividend and sooner or later Mr Market will raise the price.
falconetti aanthony profile picture
'headwinds' same term Jeff Immdumb used to use to explain GE stock price always heading south..their debt nearly caused them to go BK- twice.. AT&T pprob will need to cut dividend in half...use the cash flow to extinguish debt..

competition is gonna hurt T's mobile business..I use Spectrum.. just as good, 1/3 as expensive as AT&T..
Z Hu profile picture
@falconetti aanthony the author has stated 8B of the total 16B cash flow is directed at dividends. As long as T can balance their budget, they would not need to cut dividend. More likely, T would simply slow down the rate of their dividend increases and hold steady, to decrease their dividend payout ratio going forward to maintain their status as a dividend aristocrat.
Excellent data and commentary.
I_Am_The_Walrus profile picture
If T goes under, who gets paid first, the creditors or shareholders?
“AT&T's market cap is close to $110 billion while its enterprise value is at $250 billion. Every 1 percent move in the enterprise value leads to 2.3% percent move in the stock price.”
@Bluesea Research

The ATT EV is indeed 2.3x its Market Cap, but is there a fixed correlation between the two? I don’t think so…

ATT could borrow more, or pay down more, and shift the EV… and the stock price moves daily changing the Market Cap. I don’t see that the multiple of one to the other leads to a fixed change as you have implied.
jesjessie profile picture
any company , no matter how great they appear to be , with as much debt as $143 billion is waving a huge big red flag for investors , it just takes one wrong management move and all of the cards come tumbling down
@jesjessie this is my entire problem with this company
Wireless loss from Dish and satellite service is coming. No pricing power. Stankey needs a pay cut!
@San Marzano T is Dish's partner. They pay T to use their 5G network. If Dish takes off, T Benefits as well.
The dividend will have to be cut again in the next 5 years.
Old Professor profile picture
My ongoing bet has been that AT&T management would not cut the dividend again except in the event of highly unlikely challenges. Now, I would change those two words to "improbable" or "not likely challenges," suggesting that risk may have increased somewhat.
Mscape profile picture
When they start to implement Stankey's new RTO policy there will be chaos internally as people leave the company
@Mscape People leaving the company will be share price friendly.
Ted Waller profile picture
I just can't imagine business getting so bad the div would be cut. The wheels would have to completely come off, which wont happen to this massive, systemically important company. At a 7.16% yield the stock doesn't have to do much to match the market.
Code Talker Market Analysis profile picture
I've been holding off buying more $T. I'd consider buying more under $13, assuming FCF holds up for the year. But I don't think FCF will meet company targets.
@Code Talker Market Analysis If $T goes under $13, we’re in a deep recession and all your stocks are suffering.
Z Hu profile picture
@Code Talker Market Analysis Personally, I have a limit order in place at 15 and will begin accumulating.
In this 'analysis,' there is no mention of the extraordinary success of the AT&T fiber-to-home/business expansion, disproving the contention that AT&T lacks revenue growth. AT&T's penetration rate for fiber-to-the-home subscribers is DOUBLE what they initially projected. AT&T will complete 30 million fiber homes/businesses passed by the end of 2025. The $16 Billion FCF number for 2023 is already in the bank, yet this analysis chooses to ignore a fundamental growth driver with its fiber expansion - Why?
@minnehot T is doing a great job expanding fiber and this indeed should be their primary growth strategy. However profits aren't a slam dunk as fiber typically needs 30% uptake of homes passed to profit, possibly higher now that rollout costs have gone up. T is getting low 30s, which is fine for now but with increasing competition including CableCos upgrading to multigig at 1/5th the cost, cable will be better positioned to compete on price when they are pressed to. FWA/5G Home Internet from VZ/TMUS isn't a direct threat to fiber but all it takes is 5% uptake to disrupt fiber profits in a given area. Plus there are more smaller fiber overbuilders. Even so fiber is T's best bet, however ROI could take a lot longer.
Backwards looking article.
Reading this, I know you never looked at the debt maturity profile investors.att.com/... . If AT&T can manage >$2 fcf a share coming years everything is manageble and debt is reduced to healthy debt/ebitda levels, investors get their divi and multiple expansion can occur before the next big(ger) capex cycle starts.

>$2 FCF a share should be manageble and if so, at&t trades far below fair value. If 2$ FCF isn't reached then this is not a big problem looking at the maturity profile, but it will be harder to maintain things. Not meaning a divi cut per se.
@Mylett Little addition about former FCF www.macrotrends.net/...

Looking historical ex wbd $2 should be manageble for the no sayers. Big capex cycles always was part of this business and always will be.
@Mylett just so much debt to consider
csparksrmc profile picture
T is a slowly sinking ship. Terrible management, and on steady decline in the years I've thrown money into this loser.
DIVPLUS profile picture
Does this stock have to go to zero before Stankey & the Board are run out of town?
jakeelwood5 profile picture
Oh good, another negative article on T.
And what if Stanky is not lying... $16 bln free cash flow..
@Mike Stayley Management knows more than the rest of us!
How is ATT attracting such large amounts of new wireless clients if their 5g network is so behind Tmobile..??
@Mike Stayley T is nearly comparable to TMUS in low band 5G coverage but not as high performing. T is behind both TMUS and VZ with high performing midband 5G, which is especially more useful with 5G Home Internet, which T doesn't play very strongly in. Perception wise T apparently doesn't have complaints about 5G.
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