The markets finally fought their way back to break-even and above as the quarter ended, and now all investor eyes will be trained on first-quarter earnings results. While some of the pre-announcements were dreadful, most of them have long since been factored in, and with interest rates still very low, investors looking to add capital should still focus on top dividend-paying stocks.
We screened the Jefferies Franchise Picks list of top stocks to buy for the solid growth companies that also pay outstanding dividends. The Jefferies team has done a good job this year of picking winners, and the Franchise Picks for the most part have performed well. We found four stocks rated Buy that fit in almost all growth portfolios.
AT&T
This company will continue to serve customers regardless of outside influences and still makes good sense despite a solid 2016 run so far. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE.
The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. With shares trading at a very cheap 12.5 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic, but increased device financing plans.
Fourth-quarter earnings were in line with forecasts. A change in accounting for the entertainment group lowered revenue/EBITDA by $300 million for the quarter. The analysts note that this knocked three cents off the per-share bottom line numbers. All in all, a solid quarter, and another reason for conservative accounts to own the stock, especially with solid DirecTV additions and mid-single-digit earnings growth estimated for 2016.
AT&T has been focusing on the IP VPN and Ethernet services. This outstanding business model, along with the decline of Verizon’s market share in the arena, has helped the company to meaningfully grow its revenues from strategic business services. Apart from taking appropriate technical measures, the company has collaborated with big cloud service providers like Amazon Web Service and data center operators to provide Ethernet connections.
AT&T investors receive a 5.17% dividend. The Jefferies price target for the stock is $40, and the Thomson/First Call consensus estimate is $38.41. Shares closed Friday at $39.05.
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