AT&T recently announced a share buyback program pushing $16 billion at its current price. This news comes with one of our favorite announcements, a huge dividend increase! The shareholder value for AT&T is now much larger than expected. This, accompanied by forecasts for long-term revenue growth in the 4-7% range or better is excellent news for AT&T shareholders. This news was even stronger than most analysts had anticipated.
“The dividend and buyback will give the stock a lot of support if we do enter a recession,” said UBS analyst John Hodulik. “They’re just producing a lot of cash.”
Reports are coming in showing double-digit percentage growth in adjusted earnings per share for 2008 and greater than that is expected from its wireless business.
AT&T also expects annual consolidated revenue growth in the mid-single-digit percentage range for 2008 and beyond.
“The big change today is we’re looking at meaningful long-term revenue growth … that should result in multiple expansion,” said JP Morgan analyst Jonathan Chaplin, adding that AT&T’s share-price trading multiple could increase by 15 to 20 percent as a result of the outlook.
If you are looking to diversify with dividend stocks, especially if you have a financial heavy portfolio, AT&T may be worth a look. With growth in the expanding wireless industry, a current yield of 3.70% and a steadily increasing dividend, this may be one time you might want to pick up the phone!