Dividend Stocks

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>>> AT&T (T)


https://www.thestreet.com/story/13646215/3/10-best-dividend-stocks-to-own-now-for-a-safe-retirement.html



Both AT&T and Verizon are diversified telecom giants and their highly predictable revenues make them both a solid choice for conservative investors seeking safe income from dividend stocks. But aside from this, the two companies could not be more different in makeup.

While Verizon's profits are derived almost entirely from wireless, AT&T relies on four groups. These include Business Solutions 49%, Entertainment Group 24%, Consumer Mobility 24% and International 3%.

AT&T strategy has been guided by the secular decline in it legacy landline telephone business. A 6.6% average growth in wireless customers however, has more than made up for the wireline decline. The entertainment group is experiencing major expansion from the 2015 acquisition of DirectTV that adds firepower to AT&T U-verse brand.

AT&T is often referred to as an industry giant. This refers to the high barriers to entering both the telecommunications and entertainment industry. The amount of capital equipment, regulatory licenses and approvals provide a heavy coat of armor to existing participants.

For the past three decades the industry has been marked by consolidation of the major industry players. Last years DirectTV buyout is simply the latest example. This phenomenon is quite likely to continue as sectors like wireless and entertainment mature.

Security and predictability are big parts of a safe retirement and AT&T fits this description to a T (pun intended). It has consistently increased the payout in each of the past 32 years, making the company part of the Dividend Aristocrats Index.

During the depths of the 2008 financial crisis, AT&T boosted its dividend 12.7%. The shares offer a current yield of 4.5%. The $1.92 dividend was last increased at year-end 2015 and so we would expect another gain this year as well. The prospective dividend is likely to range between $1.96 and $2.00.

AT&T has been a bit slower in growing its dividend in recent years: 2.3% on average the last five years versus 5.5% the previous five. The combination of a high payout ratio (80%) and the DirectTV acquisition is the reason. However, with over $35 billion in operating cash flow and capital spending coming down, the pace of earnings and dividend growth could notch up in several years.

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