AT&T Inc. (T, Financial) delivered stellar earnings for the third quarter last week, changing the narrative of the company. The telecom giant decided to focus on telecom and cloud services to stabilize its business, which was previously exposed to entertainment assets through WarnerMedia. The recent two quarters are indications that the strategy is paying off.
In addition, the company has so far managed to weather the headwinds of the current economic crisis. This can be measured by the fact that even though inflation is on the rise, customers are still paying for wireless plans. AT&T added 708,000 postpaid phone subscribers and 338,000 new fiber internet subscribers in the September quarter.
Despite a recent price hike, AT&T remains strong and profitable with robust numbers across the board. The telecom company's success can be seen in its ability to stay ahead of the competition by offering new and innovative products, such as video streaming services, high-speed internet packages and cutting-edge mobile technology. Despite rising costs and fierce competition from smaller players, AT&T remains one of the most powerful players in the telecommunications industry today.
A strong business model and outlook
AT&T could be considered an ideal stock for several reasons.
First, the company has a long history of success and profitability, having been in operation since the late 1800s. This reliable longevity helps to reassure investors that AT&T is a safe bet for their money.
Second, AT&T continues to be a leader in its field, consistently innovating and adapting to changing market conditions. With its broad range of products and services and a strong focus on customer needs, the telecom gaint offers investors a stable business model that can help grow and protect their investments.
Finally, the company is well-supported by the broader economy. Because of its size and scope, AT&T has robust relationships with other businesses across many industries, giving it diverse sources of revenue that help ensure stability.
Despite economic uncertainty and high inflation, AT&T continues to attract new customers at a steady rate. In the third quarter alone, revenue for wireless service providers jumped 5.6%, while revenue for broadband providers went up 6.1%. Overall, revenue was $30 billion for the third quarter, while earnings before interest, taxes, depreciation and amortization came to $10.7 billion. Both figures were ahead of analysts' estimates.
AT&T has seen major price increases over the past several months, yet the company has continued to experience strong growth. This is due, in part, to the fact that many consumers are willing to pay a premium for unlimited data plans. With inflation threatening to drive up costs across the board, it seems wireless service remains one area where consumers are not afraid to spend more to get the quality they need. Whether it is the company's top-notch network or its unbeatable customer support, plenty of factors keep customers coming back for more.
Dividend is secure
AT&T's recent results strengthen its position within the wireless industry. They also explain how the company maintains a very healthy dividend payout. With its many decades of successful earnings and consistent dividend payouts, the company has become almost synonymous with income investing. Its history of reliable dividends has also earned it a reputation as a top pick for investors seeking steady returns. Over the years, AT&T's strong financial performance has only reinforced its status as one of the most trusted companies for investors looking for long-term growth and security.
That changed in 2021, however, when the company had to cut its dividend by nearly half as part of its decision to spin off WarnerMedia. But this was necessary because the telecommunications company had accumulated a large amount of debt over time buying media assets. Despite the dividend cut, AT&T will still pay $8 billion in dividends this year, which is not a huge amount considering the company expects to have $14 billion in free cash flow this year and somewhere around $20 billion in 2023.
What's even better is that even after paying the dividend, the company will have around $6 billion to pare down debt. This is important for investors because everyone's attention has been on AT&T's debt situation recently.
Takeaway
AT&T has long been one of the titans of the telecommunications industry with a strong focus on providing cutting-edge communication services to consumers and businesses alike.
After divesting its media assets to concentrated on its core competencies, AT&T looks better than ever, with renewed dedication and focus on positioning it for continued success in an increasingly competitive market. With its enhanced financial position and renewed energy, the company is well positioned to meet the challenges and opportunities of the modern business landscape.
Taking all these factors into consideration, the stock may be a good opportunity in the current environmet.
