Recently, AT&T Inc. (NYSE:T) has increased its annual dividend from $0.47 to $0.48 per quarter, an increase of 2.1%. (Source: “AT&T Increases quarterly dividend by 2.1%,” AT&T, December 18, 2016.) It’s low, but higher than inflation. AT&T stock is trading at around $36.00 to $37.00 per share, one of its highest levels since 2007. AT&T stock’s strength is its growing userbase.
But the best reason to own AT&T stock might be its 5.3% dividend. Dividend growth also becomes more interesting when the rate is higher than inflation. Now that is the case. As for the share value, Jefferies has a $40.00 price target for the “Buy”-rated AT&T stock with a consensus target of $37.42. Dividends are one of the primary fuels of investment strategies. Dividends protect investors’ gains against inflation—though admittedly this has been less of a problem lately.
Not so long ago, AT&T, also known as Ma Bell, was a landline operator. Today’s AT&T has little in common with that business. The company has become one of the leaders in mobile communications. It is the world’s largest provider of pay TV with customers throughout the Americas after acquiring DirectTV.
In the United States, AT&T’s wireless network boasts the highest 4G LTE signal. (Source: Ibid.)
Several companies like to announce dividend increases around the beginning of the year. The year 2016 was no exception. However, while dividend yields make AT&T stock a fitting pick for a safe investment strategy, the company’s technology is essential to growth.
AT&T has just announced that it wants to begin testing the new ultrafast 5G connectivity.
5G connections allow users to surf the Internet at speeds said to be 100-times higher than the latest 4G LTE technology.
Using 5G technology, users can download content at speeds measured in gigabits per second rather than megabits, which is the current standard. To expand on this improvement, consider that a 5G connection could allow users to download an entire movie in less than three seconds. Sadly, users will have to wait a mere minute to download the entire Rocky franchise before they can watch it.
AT&T does not expect to offer 5G before 2020. The infrastructure modifications will take a few years to reach its customers’ homes. It would also need to adapt the latest smartphones, given the nature of its business. The cost of the WARP speed connections could be higher, because the infrastructure will cost more than the advanced optical fiber used today.
Indeed, 5G is not a tech figment. The technology exists. Qualcomm has launched three new “Snapdragon” platforms for wearable devices and the LTE modem “Snapdragon X16.” These are important steps toward 5G. Nokia, through its MWC 2016, has started to show off some of its 5G applications in the context of driverless cars. (Source: “What a world with 5G will look like,” CNN, February 9, 2016.)
For AT&T and 5G it really is a question of adaptation time only. For this reason, AT&T is the kind of dividend stock that could have a place in any income portfolio.