Dear Mr. Berko: I bought 500 shares of AT&T at $32 in 2012, and I’m losing money. I should have sold the stock in 2016 when it hit $44, but my stockbroker talked me out of it. Now I want to sell it and buy 100 shares of Apple, which is way down from its high price. My broker is adamant that I keep AT&T, and he doesn’t care for Apple. I’d appreciate your opinion.
— LG, Akron, Ohio
Dear LG: Kudos to your wise broker. I recommend that you follow his advice.
AT&T (T-$31.26) pays a spotless 6.7 percent dividend, which was recently increased for the 35th consecutive year. T has had a stinky past 12 months, linked to Washington’s objections to the Time Warner merger, worries about subscriber losses, wishy-washy prepaid mobile additions and a queerly volatile market. However, the acquisition of Time Warner, now known as WarnerMedia, could be the master stroke that creates the most powerful media juggernaut in the country. T has been one of the largest distributors of media connectivity for over 20 years. Now combining distribution with connectivity, T can become the iconic Ma Bell it once was. Meanwhile, T’s high-yielding $2.04 dividend, totaling $15 billion, represents an attractively low 60 percent payout from T’s prodigious $25 billion free cash flow. That’s a 1.66 coverage — and with a lot of investor comfort built in there.
T’s 2019 earnings are expected to come in at $3.70 a share, up 5.7 percent from last year’s $3.50. That’s not insignificant! When management combines DirecTV with content from WarnerMedia (CNN, HBO, TNT, The CW, Cartoon Network, Turner Classic Movies, etc.), advertising sales should increase grandly, as will the per-second fees paid by advertisers. And that’s really significant! Smoothly coordinating WarnerMedia with DirecTV will require most of this year to accomplish, but it will put T in the position to become the dominant media and telecom company in the U.S. Additionally, many observers see T as significantly gaining ground in the expanding digital advertising arena, where its analytical tools will enable management to generate a panoply of customer promotions.
