Recent buy – AT&T (T)

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.

TWe 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?

6 thoughts on “Recent buy – AT&T (T)

Add yours

  1. Hey P2035,
    Nice addition to your portfolio! That dividend yield is really tempting! I own some Shares of T myself but am not considering adding more to the company yet. I really don’t like that debt level, even though their dividend seems safe.
    I am watching some other companies at the moment: WSM, TGT, BBBY, KHC (perhaps that’s what you wanted to say, as I am not familiar with KHS ticker).
    There seem to be too many opportunities in the market now with the recent fall so it’s hard to choose 🙂

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    1. Hi BI. Yes KHC 🙂 Well I was not planning for purchase of T as well, but the price is just so comparably low. As you see my calculations I dont see debt as big issue. Its not that drasticly big. NetDebt/EBITDA of ~3 is ok. Especialy when company is focusing of decrease of the debt. The course looks good. While other companies are continuing to increase debts with share repurchases. I think its not rational to borrow money for share buybakcs. What reates to TGT there is some risk to retail business with e-comerce.

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    1. Hi Hardbit. It one of baltic banks. Nothing special 🙂 I know there are better brokers out there but im a bit conservative and hope that my bank will follow and improve some day with better US stock options and 30% US dividend tax issue that other brokers have fixed 🙂

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      1. it cost 35€. As i know other new brokers have some form to fill in and no 30% is charged. LT and US has agrement re double rax. So all you need us to prove US that your not a proxy US citizen avoiding tax 🙂 Banks doesnt bother to solve this issue 😦 for now that extra 15% cost me only 36€ so I dont bother for now. As I know https://brokeinvestor.net solved the issue

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