AT&T’s Stock Dividends Pay Over 6% a Year. Is That an Opportunity Or a Warning?

For 35 consecutive years, AT&T has raised the dividends paid to shareholders.This year, the Dallas telecom giant will pay $2.04 a share, up from $1.74 in 2012. But today’s stock price is lower than it was seven years ago.As a result, the dividend yield on AT&T shares was 6.3% on Monday — near the top of AT&T’s historical range and the highest prolonged payout from the company since the wake of the Great Recession.At the end of 2018, when AT&T stock was selling below $29, the yield topped 7%. Since then, the yield has declined as the stock appreciated. On Monday, AT&T closed at $32.30 a share.AT&T remains among the highest-paying dividend stocks in the S&P 500, and it’s offering three times more than the yield on a 10-year Treasury note. The question is whether AT&T’s high payout is an opportunity or a warning?“That’s the way to think about it,” said Michael Hodel, an analyst who follows AT&T for Morningstar in Chicago. “We believe AT&T has been over-punished by the market, which has been too pessimistic. As AT&T pays down debt, we expect investors will get increasingly comfortable with its balance sheet. So we think this is an opportunity.”Morningstar recently put AT&T on its list of best ideas for investors. In the U.S., that group typically includes 25 to 50 stocks, Hodel said.Morningstar focuses on a company’s fundamentals, and AT&T faces headwinds in pay television because customers have been cutting the cord for several years. But other parts of the company are doing much better, Hodel said.  Continue reading...