All good things must come to an end. We are near the end of the long stimulus-induced Federal Reserve money-printing boondoggle. Combined with massive government spending and round after round of $120 billion per month of quantitative easing, the liquidity seemed to never end. Just like in 1999, who cares about valuations anyway? Well, the piper must be paid, and we may have seen the beginning of that payment last week as the Nasdaq posted the biggest four-day loss since February of last year.
Many on Wall Street continue to cite the so-called TINA (“there is no alternative”) conundrum, as rates are still very low on a historical basis despite the current increases and those that are expected. The reality is that they are right and equities will remain the place to be for everybody except those with an extremely low risk tolerance.
What makes sense is to rotate to value, especially mid-cap and large-cap value that pays consistent and dependable dividends. We screened our 24/7 Wall St. research database and found five outstanding ideas for investors. 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.
In an attempt to lower its large debt load, AT&T last year 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 moved the DirecTV and AT&T TV services in the United States into a new entity run jointly by the new partners. AT&T retains a 70% stake in the business, while TPG pays $1.8 billion in cash for a 30% stake.
The company also spun off Warner Media and merged it with Discovery. AT&T will be resetting its legacy dividend lower, which will greatly help the company manage cash flow. It is expected that the new dividend payment will be around $1.15, since there are likely to be more shares outstanding by the time of the spinoff. Based on Friday’s closing price, investors will still receive a very solid 4.30% dividend.
AT&T stock has been battered ever since the dividend cut and spin-offs were announced, but the reality is it has an incredible business and has done an outstanding job in chopping its massive debt and getting rid of nonperforming assets.
BofA Securities has a Buy rating with a $36 price target. The consensus target is just $30.26, and shares closed on Friday at $26.29.