With the S&P 500 trading in a tight 3% range for almost three months, when there is a big move up or down it’s very possible it could be violent, not unlike the one we experienced last August. While the potential for the Federal Reserve to raise rates was somewhat lessened after Friday’s horrible jobs numbers, the Bank of Japan and the vote in Great Britain all could stir the proverbial pot. In addition to owning some sort of portfolio protection, investors may want to move to less aggressive stocks.
We screened the Jefferies Franchise Picks stock list for the dividend paying stocks that may offer investors some insulation from a large increase in volatility. We found four that look like good additions now.
This company had an outstanding first quarter from a stock price standpoint and could be poised to go higher. 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 its 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.
The company’s first-quarter revenue rose 24% versus the year-earlier period primarily due to the July 2015 acquisition of DirecTV for $49 billion in equity value. The company added 2.3 million wireless subscribers during the first quarter. About 328,000 of the additions were DirecTV net adds. The company’s Entertainment Group broadband grew with 186,000 IP broadband net additions.
Jefferies noted that after evaluating three scenarios that address and combat cannibalization, certain new initiatives should be impactful. As over-the-top (OTT) video becomes more prevalent, the analysts examined the per-subscriber economics relative to that of traditional video, and highlight key implications in a streaming video world. With AT&T set to launch new offerings later this year, the analysts provide a case study highlighting potential opportunities and risks. They see the potential for modest accretion in 2020, with further upside should AT&T successfully minimize cannibalization within its existing base.
AT&T investors receive a 4.9% dividend. The Jefferies price target for the stock is $42. The Thomson/First Call consensus target is $39.57. Shares closed Monday at $39.34.