A detailed quantitative analysis by AT&T Inc. (T) is linked here. Below are some highlights from the analysis linked above:
Company description: AT&T Inc. (formerly SBC Communications) provides telephone and broadband services and holds full ownership of AT&T Mobility.
Fair value: When calculating the fair value, I take into account the differential fair value of the present value MMA along with these four fair value calculations. A detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham Number
T trades at a premium to all four of the above ratings. Since the physical book value of T is not meaningful, a Graham number cannot be calculated. If the NPV MMA differential is also taken into account, the stock is trading at a premium of 30.6% on the calculated fair value of USD 24.05. T does not deserve any stars in this area.
Dividend analytical data: There are three possible stars and three key metrics in this section. A detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key Metrics
4. Dividend growth rate
5th years Div. growth
6. Rolling 4 year old Div. > 15%
T earned a star for 3.) above in this section. T received a star for an acceptable score on at least two of the four key metrics measured. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 15 consecutive years.
Dividend Income vs. MMA: Why would you take the equity risk and invest in a dividend stock when you could get a better return on a much less risky money market account (MMA) or a government bond? This section compares that stock’s earning power to a High performance MMA. There are two points covered in this section. A detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. years to> MMA
The NPV MMA Diff. of the $ 1,342 is below the $ 2,000 target I’m looking for for a stock that has increased dividends as long as T has done so. The stock’s current return of 6.62% exceeds the estimated average MMA rate of 2.74% for 20 years.
Peers: The company’s peer group includes: Lumen Technologies Inc. (LUMN) with a yield of 7.8% and Verizon Communications Inc. (VZ) with a yield of 4.3%.
Conclusion: T earned no stars in the Fair Value category, earned one star in the Dividend Analytical Data category, and did not deserve any stars for a total of one star in the Dividend Income vs. MMA category. This ranks T quantitatively as 1 star very weak Warehouse.
With my D4L-PreScreen.xls Model I found that the stock price would have to drop to $ 20.76 before T’s NPV MMA differential rose to the minimum of $ 500 that I’m looking for for a stock with 0 years of consecutive dividend increases. At that price, the stock would generate a 10.0% return.
Resetting the D4L-PreScreen.xls The dividend growth rate model and solution required to generate the target MMA differential of $ 500 NPV. The calculated rate is 4.3%. This dividend growth rate is higher than the 0.0% used in this analysis, so there is no margin of safety. T has one Risk assessment from 2.50, which it classifies as a high risk stock.
The stock is currently trading below my calculated fair value price of $ 24.05. The free cash flow payout of 223% (versus 55%) is well above my desired maximum of 60%, and the debt versus total capital of 52% (versus 49%) is above my desired maximum. I won’t consider expanding my position in T until the metric improves.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. In general, this is never true. Before buying or selling stocks you should do your own research and arrive at your own conclusion. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I was long in T (2.0% of my dividend growth portfolio) and long in VZ. Show a list of all my dividend growth portfolio holdings Here.
On the subject of matching items:
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– Analysis of Nucor Corporation (NUE) dividend stocks
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Tags: T, VZ, S, CTL,