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AT&T Inc. Closes Sale of $2.75 Billion Global Notes. Is It A Buy? (NYSE: T)

AT&T Inc. (NYSE: T), a multinational conglomerate holding company, has recently made significant moves in its financial operations. On June 2, 2023, the company successfully closed its sale of $2.75 billion aggregate principal amount of its 5.400% Global Notes due 2034.

This sale was conducted under an Underwriting Agreement, dated May 30, 2023, between AT&T and several financial institutions, including BNP Paribas Securities Corp., J.P. Morgan Securities LLC, Santander US Capital Markets LLC, and TD Securities (USA) LLC.

This article will cover the sale, AT&T dividend, and reasons to buy.

Key Takeaways From Sale

  1. AT&T’s Financial Strategy: The sale of the Global Notes and the redemption of the Floating Rate Global Notes are significant financial moves by AT&T. They reflect the company’s active management of its capital structure and its commitment to meeting its financial obligations.
  2. Role of Financial Institutions: The involvement of major financial institutions such as BNP Paribas Securities Corp., J.P. Morgan Securities LLC, Santander US Capital Markets LLC, and TD Securities (USA) LLC in the underwriting agreement underscores the importance of these institutions in facilitating large-scale financial transactions.
  3. Regulatory Compliance: AT&T’s adherence to the Securities Act of 1933 and its registration of the Notes with the SEC highlight the regulatory requirements that companies must meet when issuing securities.

The Notes were issued under the Indenture, dated as of May 15, 2013, between AT&T and The Bank of New York Mellon Trust Company, N.A., as trustee. As amended, they have been registered under the Securities Act of 1933, pursuant to a Registration Statement on Form S-3 previously filed with the Securities and Exchange Commission (SEC).

In addition to the sale of the Global Notes, AT&T issued a notice for the redemption in full of all of the outstanding $750 million aggregate principal amount of Floating Rate Global Notes due 2024. The redemption is set to occur on June 12, 2023, at a redemption price of 100% plus accrued and unpaid interest to, but excluding the Redemption Date.

AT&T Dividend

I personally own AT&T stock for the dividend. Many investors often buy AT&T stock for its dividends for several reasons:

  1. Attractive Dividend Yield: AT&T has a history of offering an attractive dividend yield, which is the annual dividend payment per share divided by the stock’s price per share. As of the latest reports, AT&T’s dividend yield stands at 7.13%, which is significantly higher than the average dividend yield of the S&P 500. This high yield can provide a steady income stream for investors, especially those who are income-focused or in retirement.
  2. Dividend Stability: AT&T has a long track record of paying dividends and maintaining and even increasing them over time. This stability is appealing to investors who value consistent returns and lower risk.
  3. Payout Ratio: The dividend payout ratio, which is the portion of earnings a company pays to shareholders in dividends, is another important factor. AT&T’s payout ratio is 57%, suggesting that the company retains a substantial portion of its earnings for growth and debt reduction while still returning a significant amount to shareholders. This balance can indicate a sustainable dividend policy.
  4. Debt Reduction and Financial Health: AT&T has been aggressively repaying its debt, which can reassure investors about the company’s financial health and ability to continue paying future dividends in the future.
  5. Diversification: Dividend-paying stocks like AT&T can provide diversification benefits to an investment portfolio. They can counterbalance more volatile growth stocks, helping smooth out returns over time.
  6. Total Return Potential: When considering the total return, which includes both capital appreciation and dividend income, AT&T’s stock can be appealing. Even if the stock price doesn’t increase significantly, the dividend payments can contribute to a positive total return.

In conclusion, AT&T’s attractive and stable dividend yield, sustainable payout ratio, commitment to debt reduction, and potential for total return make it a popular choice among dividend investors.

Is AT&T A Buy?

AT&T Inc. has been the subject of various analyses and discussions regarding its potential as a stock investment. Here are some key points to consider:

  1. Performance and Growth: AT&T has shown strong performance in its mobility business unit, which accounts for over two-thirds of its revenue1. The company added 2.9 million postpaid phone subscribers in 2022, outperforming competitors like Verizon2. AT&T’s fiber-optic initiatives have also seen consistent customer additions, leading to stronger average revenue per user (ARPU).
  2. Financial Health: AT&T has been aggressively repaying its debt, reducing total debt from $200 billion to around $135 billion1. The company’s dividend yield stands at 5.7%, and its dividend payout ratio is 57%, leaving room for paying dividends and reducing debt2.
  3. Analyst Ratings: Analyst consensus ratings for AT&T are moderate buy, with a high price target of $25.00, an average target of $21.38, and a low target of $17.003. The stock’s technical analysis also suggests a favorable risk-reward ratio.
  4. Future Prospects: AT&T is focusing on 5G and fiber connectivity4. The company’s focus on these areas, along with the potential divestment of its cybersecurity division, positions it for future growth.
  5. Earnings Estimates: The earnings estimates for AT&T show an average estimate of $0.60 for the current quarter, with a range of $0.55 to $0.66. The revenue estimates for the company indicate an average estimate of $30.02 billion for the current quarter.
  6. Dividend Yield: AT&T’s stock has a dividend yield of 7.13%, which is considered attractive for income-focused investors.
  7. Free Cash Flow: AT&T’s projected $14 billion free cash flow (FCF) in 2022 reflects a 47% decline due to the spinoff of WarnerMedia and the divestiture of DirecTV. However, Wall Street is particularly focused on AT&T’s 2023 FCF outlook, with estimates of $16.2 billion.

In conclusion, AT&T’s stock appears to be a good buy based on its strong performance, financial health, positive analyst ratings, future prospects, and attractive dividend yield. However, as with any investment, potential investors should consider their own risk tolerance and investment goals and possibly seek advice from a financial advisor.

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