Summary

  • I bought more AT&T after receiving my custom stock alert
  • Shares crossed over the 5% yield mark which made them look compelling
  • Expecting 7-8% annual total returns from this purchase
  • 40 more shares will bring an additional $78.40 of income based on today’s dividend rate

Introduction

I’m playing a little catch-up with my portfolio changes.  On May 2nd I bought more AT&T after receiving a text alert that it crossed over 5% dividend yield.

custom stock alert for at&t

AT&T, along with other telecoms I typically view as cash cows to be periodically purchased at an appropriate yield.  I could talk about the underlying business growth but this will just be a slow steady eddy type stock.  I’m not expecting rapid growth so initial purchase price is paramount.

FAST Graphs

15 year fast graph of at&t

The current valuation on AT&T shares corroborates my assessment.  The blue line is the average PE valuation that shares have traded at over this 15 year time frame.

The recent decline in stock price put it slightly below that value.  That, along with a 5% dividend yield, seemed like a decent time to add to my position.

Generally, I am expecting earnings to grow 2-3% per year along with about a 2% dividend increase.  This would put total return in the 7-8% range which is in line with historical averages and sounds good to me.

Historical Yield

5 year dividend yield chart from ycharts for at&t

Like I mentioned above, a company like AT&T or Verizon (and even REITs) tend to meander around certain yield and valuation points.  My initial shares were bought in the mid 5% yield range so my current purchase wasn’t the best it could have been.  Shares had traded much lower during almost the entirety of 2016 and only recently began to spike once more.

Adding To A Winner

One of the harder aspects of investing is adding to a winning stock.  There is an internal struggle of not wanting to pay more than what we paid in the past.  That is a weakness we, as investors, need to overcome to be successful.

my current historical return of at&t returning 15% annually

I first purchased shares 11/3/2015 at an average price of $33.69.  The stock then proceeded to rally and even after the recent decline I’ve still averaged 15% a year since owning them.  My initial shares have a yield on cost over 6% which is fantastic for holding for only 18 months.  This was due to initial high yield, reinvesting income and experiencing dividend growth.  This is the three headed monster I will refer to now and again.

Conclusion

AT&T shares look reasonably valued today and for me made a compelling buy.  I had been sitting on more cash that I had liked as overall valuations have made opportunities harder to come by.  We are two dividend payments into the current rate so don’t expect an increased payout until next February.

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