Those who have worked in the financial arena for decades saw the potential for some big trouble this year in January when a massive spike in retail trading sent shares of video game retailer GameStop into the stratosphere in an incredible parabolic move caused by the massive short position that had been built on the company’s stock. The entire float, and then some, was sold short and when the retail buyers piled in, the stock exploded higher. That move was exacerbated by the short sellers being forced to buy shares to cover.
This kind of trading, combined with a ton of cash being thrown at the market for over a year, has moved everything into a very precarious situation. With inflation starting to hit hard, we are seeing ever more articles about how widespread shortages and production snags are driving up prices for an array of items, including cars, appliances, energy, food, cigarettes and medical care.
Fortunately, the economy is starting to open up and people are returning to work and also to play. That means vacation travel and spending. But the bottom line for investors, and we have said this for some time, is that it may be time to move to more defensive positions that pay dividends as we ride out what could be a substantial correction.
We screened the BofA Securities research database looking for companies that nervous investors can move to now that are all rated Buy at major Wall Street firms and all pay substantial and dependable dividends. It is important to remember, though, 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 6.47% dividend. BofA Securities has a $36 price target for the shares, which compares to the lower Wall Street consensus target of $29.97. AT&T stock closed trading on Tuesday at $32.26 a share.
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