Linked here is a detailed quantitative analysis of AT&T Inc. (T). Below are some highlights from the above linked analysis:
Company Description: AT&T Inc. provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless).
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
T is trading at a premium to all four valuations above. Since T's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 86.7% premium to its calculated fair value of $18.89. T did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
T earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. T earned a Star for having an acceptable score in 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 30 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
T earned a Star in this section for its NPV MMA Diff. of the $1,272. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as T has. The stock's current yield of 5.1% exceeds the 2.54% estimated 20-year average MMA rate.
Memberships and Peers: T is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: CenturyLink, Inc. (CTL) with a 7.1% yield, Sprint Nextel Corp. (S) with a 0.0% yield and Verizon Communications Inc. (VZ) with a 4.6% yield.
Conclusion: T did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks T as a 4-Star Strong stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $51.40 before T's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 30 years of consecutive dividend increases. At that price the stock would yield 3.5%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is -1.9%. This dividend growth rate is lower than the 2.3% used in this analysis, thus providing a margin of safety. T has a risk rating of 1.75 which classifies it as a Medium risk stock.
The gains in consumer wireless and broadband should continue to outpace losses of wireline customers. After its failed attempt to acquire T-Mobile, T has been adding wireless spectrum and has the liquidity to continue to grow. Investors looking for yield in companies with a solid financial performance have run T's stock price up over the last year. It is currently trading nearly double my calculated fair value price of $18.86, so for now I will remain on the sidelines waiting for a more favorable time to purchase.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in T (2.5% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.
- Lockheed Martin Corp. (LMT) Dividend Stock Analysis
- AFLAC Incorporated (AFL) Dividend Stock Analysis
- Hormel Foods Corp. (HRL) Dividend Stock Analysis
- International Business Machines Corp. (IBM) Dividend Stock Analysis
- More Stock Analysis [more]
For investors in dividend growth stocks, The Broad Dividend Achievers™ Index is one of the most widely used resources. With 201 stocks on the 2012 list, it is certainty one of the largest lists and contains most stocks listed on other similar lists. In addition, to the mainstream dividend growth stocks, The Broad Dividend Achievers lists many up and coming stocks that could one day find a place in our portfolios. [more]
The life-blood of a sound dividend growth strategy is a growing dividend. Often the initial yield of a dividend growth stock is less than other available stocks, but the dividend growth stock comes with an expectation of reasonable increases year after year. This compounding effect will quickly grow the stocks income. It is well worth the investor's time to find companies that can deliver on this expectation. [more]
The Pocket Change Portfolio (PCP) was first introduced on September 13, 2008 as a real money dividend income portfolio funded by the "pocket change" earned from my various online endeavors. Each month I report on the portfolio's progress and dividends earned. Total dividends received during the month were... [more]
Linked here is a detailed quantitative analysis of Leggett & Platt, Inc. (LEG). Below are some highlights from the above linked analysis:
Company Description: Leggett & Platt Inc. makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as products for non-furnishings markets. [more]
Linked here is a detailed quantitative analysis of 3M Company (MMM). Below are some highlights from the above linked analysis:
Company Description: 3M Co. is a diversified global company that provides enhanced product functionality in electronics, health care, industrial, consumer, office, telecommunications, safety & security and other markets via coatings, sealants, adhesives, and other chemical additives. [more]
Dividends are not paid with sales, earnings, EPS, EBIT or EBITDA. Instead dividends are paid with cash. As an investor, you want to pay close attention to the cash flow statement. Unfortunately, it is probably the least used and most misunderstood statement. [more]
Linked here is a detailed quantitative analysis of United Technologies Corp. (UTX). Below are some highlights from the above linked analysis:
Company Description: United Technologies Corp. is an aerospace-industrial conglomerate's portfolio includes Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators, and Carrier air conditioners, among other products. In July 2012, UTX purchased aerospace competitor Goodrich. [more]
Linked here is a detailed quantitative analysis of McDonald's Corporation (MCD). Below are some highlights from the above linked analysis:
Company Description: McDonald's Corporation is the largest fast-food restaurant company in the world, with about 33,700 restaurants in 119 countries. [more]
For many investors, there is no clear conviction as to how they should invest. Today's investments are guided by what was read or heard yesterday, and the popular media is constantly churning out new and different ideas. Granted it makes for some "interesting" reads, but it certainty is no way to run a portfolio. [more]
In everything we do, we always want to be the best or be associated with the best. You never hear fans yelling, ‘We’re number 2, we’re number 2′, while holding two fingers in the air. The same is true when selecting dividend stocks. One attribute of the very best dividend stocks is a long history of consecutive dividend increases. [more]
Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in January, extending the streak to 31 consecutive months of increases after June 2010's decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 60 of the last 62 months... [more]
Linked here is a detailed quantitative analysis of Lockheed Martin Corp. (LMT). Below are some highlights from the above linked analysis:
Company Description: Lockheed Martin Corp., the world's largest military weapons manufacturer, is also a significant supplier to NASA and other non-defense government agencies. LMT receives about 93% of its revenues from global defense sales. [more]
Linked here is a detailed quantitative analysis of AFLAC Incorporated (AFL). Below are some highlights from the above linked analysis:
Company Description: Aflac Incorporated provides supplemental health and life insurance in Japan (80% of earnings) and the U.S. Products are marketed at work sites and help fill gaps in primary coverage. [more]
Everyone wants to earn more. For investors in dividend growth stocks, the quick way to earn more is to select dividend stocks with higher yields. Swap those 2-4% yields in for stocks earning 6-10%, or more. Before making the trade, you should ask yourself the following two questions: [more]
When selecting income investments, the three most important questions to answer are : 1.) Is the investment increasing its dividend each year, 2.) Is the increase likely to continue into the future and 3.) Are you being compensated for the risk you are taking? When you answer yes to all three of the questions, you just might have found an excellent income investment. [more]
Linked here is a detailed quantitative analysis of Hormel Foods Corp. (HRL). Below are some highlights from the above linked analysis:
Company Description: Hormel Foods Corp. is a multinational manufacturer and marketer of consumer-branded food and meat products. [more]