Christmas came early this year 🙂 Altough I was still missing few EUR from my regular 500-600€ purchases I decided to buy in right before the end of the year. As I was struguling with what to buy one company was just too good to ignor.
We have bought 20 shares of AT&T paying 29.90 USD / share or 607 USD (incl. fee). With dividends of 0,51 USD/quarter YOC stands at one of highest in the merket 4,8% after tax (-30%) bringing additional +29 USD or +25 EUR annual dividend income and increasing our Passive dividend income to 458 EUR. or 38 EUR/mo. The massive dividend yields was just too good. As alternative I was looking to buy CSCO, but their yield is just 2,2% after tax. Sure T has very low dividend growth with past two increases were jusy +0.01$ or +2% but still CSCO would have to increase dividends by +20% just to catch up to T in 10y, not to mention the impack of more cash flow right now and compounding effect. So CSCO remains on the watch list fow now. T price decline below 30$ was just too good 🙂 Now im extra heavy on T so hope that this company will do well in L/T.
Previous buys was for 40$ and 33$. Normalized P/E of just ~10 was waaaay below the market. Sure market bets that company leverage is too big after WB aquisition. Lets check. Their TTM annual EBITDA stands at 52 bn$ while NetDebt is 175 bn$ (183-8). So the leverage stands at 3.4x. I would not say that its way too high. Lack of growth, maybe, but there is still potential. I think this Telco conglomerate has potential. Too big to grow? Maybe. Other very important metrix ISCR (Interest coverage). How much they pay for their leverage. TTM annual interest cost stands at 7.8 bn$ which is 15% of their EBITDA. With growing interests it migh reach 20-25% which is quite high, but not a tragedy 🙂 <10% is a good figure. Either way with P/E of just 10, dividend yield almost 5% (after -30% tax!) is just too good to overwight the leverage on the high side and growth potential.
One thing why their share price is so low. Share numer increase which brings in aditional supply of shares to the market. Last quarter share numer jumped from 6.3 bn to 7.3 bn. This is impact of WB aquisition. If looking at 3Q cash flow statment dividends took 3.6 bn$ while NetIncome+Amortization was 13 bn$. Quarter Capex stands at ~5 bn$ other 5bn$ or so could be directed to debt decrease so in next 2y debt would be bought down by 30-40 bn$ to 135-145 bn$ and leverage of ~2.5x. With interest increase debt decrease looks like a good plan to me. So im ok with this company from financial side, hence this is why I decided to buy more of T and ok with such large investment in this company 🙂
What do you think of T. Should I went for CSCO instead? Or maybe GIS or KHS that has declined as well?