When pundits in the financial media warn that interest rates are going higher, long-time investors laugh and think back to the days before the financial crisis in 2007 when the 10-year Treasury bond had a yield over 5%. That bond now yields a paltry 1.55%, and after taxes and inflation it actually has a negative real-return yield.
So what are income-starved investors to do? One of the best ideas is to look for stocks that pay dependable dividends and have for years. We screened the BofA Securities research universe looking for companies that pay big dividends that look like they will remain safe.
We found five that are rated Buy and make sense for investors looking to increase their income streams and have total return potential. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This is a top telecom and entertainment play. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections, with 77 million postpaid subscribers.
While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.
In an attempt to lower its large debt load, AT&T recently agreed to sell a stake in its pay-TV unit to private-equity firm TPG and carve out the struggling business, pulling the telecom giant back from a costly wager on entertainment. The transaction would move the DirecTV and AT&T TV services in the United States into a new entity that will be run jointly by the new partners. AT&T will retain a 70% stake in the business. TPG will pay $1.8 billion in cash for a 30% stake.
Investors receive a 7.19% dividend, which looks secure. The BofA Securities price target for the shares is $36, above the $29.51 consensus target. Thursday’s closing print for AT&T stock was $28.92 a share.