Passive Income - T Dividends

Thomas Ott -

There are many reasons why I hold AT&T ($T) for my passive income goals. The first one is that it was around during the Great Depression and the second, it will probably be around during the next Great Depression. I can be pretty sure that AT&T will weather the storm if another future event like the Great Depression strikes the markets.

Sure, all the stocks will drop in price, including the ones with dividends, but think of those skyrocketing dividend yields! That's how you got to look at it.

Stock Price

T closed at $30.01 yesterday (3/18/2021). It's a stock that's not in favor right now and that's ok in my book. If I were to look at my secret sauce chart generator, it looks like it's approaching an old resistance line with price support down around the $28.70 level.

Running Mr. Markov yields me an interesting picture of independent price outcomes. The price histogram chart is definitely skewed and the average price is $49.95 for AT&T. Based on yesterday's close, we're a bit below that average price. I'm not going to make any predictions but 'reversion to the mean' strategies point to the price to come up a bit. Maybe.

Other interesting factoids:

  • It has a CAGR (Compounded Annual Growth Rate) of -2.60%
  • Annual Volatility of 25%
  • High price target of $127.45
  • Low price target of $15.61

Dividends & Fundamentals

On the surface, AT&T doesn't look like a good buy to me. The only thing that attracted me to the stock was its high dividend yield of 6.94% and many people will say I fell into a dividend trap. Great point but I look at the estimated earnings projections for next quarter and see a way higher from here.

AT&T is a good dividend producer, it'll net you $2.08 a year in dividends and the stock is trading with a N/A for PE ratio. It's forward PE points to 9+, so earnings are expected to grow. Normally I'd give this stock a pass BUT, it's AT&T after all. It's not going anywhere.

It has a beta of 1, which is slightly above my target of 0.8 for beta but given the expected rising earnings and an expected low PE ratio, I couldn't pass this up.

Passive Income Risks

The biggest risk I see here is AT&T missing its earnings and not going positive next quarter, but I think in the long run they'll make money again.

They rode out the Great Depression and still paid dividends during that time. AT&T is not going anywhere and it sits on a huge pile of cash. Let's face it, telecommunications will continue to be around after I'm long dead and buried, so picking up some shares for my passive income strategy makes a ton of sense.

Disclosure: Long