For years, AT&T was a blue-chip staple that every portfolio manager held as a prominent part of growth and income portfolios. For years, the old “Ma Bell” delivered, but that era has come and long gone.
Years of overspending, crushing competition, and multiple choices for consumers have changed the telecommunications landscape, and the possibility of AT&T ever returning to past glory is highly unlikely.
We screened the company from top to bottom and found 10 reasons why investors should avoid the stock, not just now, but forever. While some would argue that it is cheap, many on Wall Street see it as a “value trap” that should be avoided at all costs.
1. Wall St. hates it
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Wall Street doesn’t like the company at all. In fact, it has more “hold” or “neutral” ratings than “buy” ratings.
2. The dividend is going to get cut
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While the dividend is gigantic there is a solid chance it gets cut again like the company did in February of 2022.
3. Rise in subscribers not a panacea
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While subscribers are expected to rise, they are expected to be of the pre-paid variety, not the more profitable post-paid ones.
4. The company has gigantic debt
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The company has a massive $132 billion in debt, and the debt service for the company could increase with higher interest rates.
5. Executives are overpaid
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Many feel the company’s executives are horribly overpaid given the company’s issues over the last few years. C-suite pay totaled a stunning $69 million last year.
6. Rates are going higher
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Long term borrowing costs for the company are expected to trend up to 6%
7. Long-term holders have done poorly
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The stock has been a long-term disaster for investors who didn’t reinvest dividends.
8. Stock was removed from the Dow
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The stock was removed from the DJIA in 2015, so the stock doesn’t get the benefit of being one of the “Dogs of the Dow.”
9. No dividend increase in 2023
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The company ended 35 years of stock dividend increase when they didn’t raise the dividend in August.
10. Possible environmental risks
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It was reported last summer the company has abandoned lead-sheathed cables that may have been contaminating soil and water sources.
While the stock has shown some turnaround ability over the last year, and the recent earnings report came in above Wall Street expectations, growth will remain tepid at best and if cash flows don’t stay high, and the company’s debt service cost rises substantially, another dividend cut could be right around the corner.
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