Summary
- Our longer-term recommendations focus most often on dividend growth investments.
- At $34 a share, the yield is exactly 6%.
- We walk you through several calculations to demonstrate the power of long-term investing and compound interest.
- Turning the first $100 into several million dollars takes years of patience and diligent saving, but you can do it.
- Why the dividend is secure looking forward.
- Looking for a community to discuss ideas with? BAD BEAT Investing features a chat room of like-minded investors sharing investing ideas and strategies. Start your free trial today »
Although we are best known for spotting short-term, fast-moving trades in addition to deep value investing, our longer-term investment recommendations focus most often on dividend growth investment. In considering the latter, we have encouraged our readers to accumulate shares of AT&T (T), especially when shares were below $30. This is because we believe the dividend is compelling at those levels. Make no mistake, we do not 'want' shares to fall back, but they were an incredible buy when the stock was yielding 7%. We believe here at $34 a share, the stock is a moderate buy, but much prefer you add at a better price. That said, at $34 a share, the yield is exactly 6%. We believe this is still highly attractive for income, and from an operational standpoint, we believe the stock could be offering share appreciation potential.
From the long-term perspective, there has rarely been a better time to consider a large position with an outlook that spans decades in the telecommunications and media giant. In this column, we want to highlight the power of the dividend itself and talk about several metrics which you need to be aware of as it relates to this great source of income. With a yield of 6% here, we discuss the dividend history and projected raises and illustrate the power of the dividend on a forward-looking basis. We further discuss why we see the dividend as being covered, at least in the near future, an issue every AT&T investor should monitor. It is our opinion that every investor who needs a stock like AT&T, but young investors stand to gain the most. Let us discuss.
Dividend growth like clockwork
AT&T raises its dividend like clockwork. Year after year, despite anything happening in the broader market, or with acquisitions, or with debt, it all comes back to how great of a dividend machine this stock truly is.
Now, we will point out that those perennial bears on the name point out that dividend payments aren't enough to offset the lack of share price appreciation or to offset those who have capital losses in the stock currently. But those losses aren't realized, they are on paper.
Now, older investors may opt to be paid the dividend and pocket the cash. Nothing wrong with that at all. Get paid! But we strongly argue that, for younger investors with a multi-decade outlook, the best play is to reinvest your dividends to acquire more and more shares. By reinvesting the dividends, your position will grow increasingly larger. With this reality, moves higher in shares will help recoup those on paper losses, while at the same time, the total dividends paid increase every single year.
The dividend has been raised every single year in recent history. Given the growth that AT&T is displaying through its acquisitions, while also working to grow its legacy businesses organically, we project that the quarterly dividend being raised by a penny each year for at least the next 10 years. As such, we expect a significant increase in the dividend. But what does this mean for a new investor?
