AT&T investors are getting the best of both worlds today. The stock’s 4.85% dividend yield is almost twice that of the 10-year Treasury and well above the 2% paid by the S&P 500. And with AT&T’s (ticker: T) stock trading at 13 times forward earnings, its valuation looks attractive.
AT&T also offers growth potential. Under a President Trump, the telecom giant should benefit from a kinder regulatory environment and lower taxes. The company should also profit from its continuing move into media, particularly its proposed $106 billion purchase of Time Warner (TWX), now awaiting regulatory approval.
Earlier today, Baird Equity Research analyst William Power upgraded AT&T stock to Outperform. This upgrade was especially notable given that Baird’s opinion of AT&T had been stuck at Neutral since 2012.
The upgrade lifted AT&T’s share price more than 2% to a recent $41.19. The stock, up 11% since the presidential election, could generate a double-digit total return in the next 12 months.
“After many years of avoiding the telcos due to competitive concerns, we are upgrading AT&T following a confluence of events that we believe significantly improve the company’s prospects over the coming years,” says Power.
In short, Ma Bell is becoming what Power calls “Ma Media,” meaning it’s no longer your parent’s telephone company.
Earlier this year, AT&T, like other telecom stocks, attracted income-hungry investors fleeing global market turmoil. Shares hit a multi-year high in July at $43.89 then fell as investors dumped pricey dividend stocks and Trump savaged the Time Warner acquisition after it was unveiled in October.
The post-election environment has been far kinder. The FCC is expected to be much more accommodative under Trump, especially regarding Net Neutrality rules. And with lower taxes, Baird’s Power anticipates “a business investment tailwind not seen in years.”