AT&T And Verizon Stocks Represent Shelter In The Current Market Storm

  • Verizon and AT&T, the two main U.S. carriers offer steadily rising dividends and attractive yields.
  • The emphasis is on minimal risk and income to shareholders.
  • When stocks get volatile these represent shelter in the storm.

While tech stocks have been highly volatile early in 2016, shares in telecom giants Verizon (NYSE:VZ) and AT&T (NYSE:T) have barely moved at all.

They represent a good shelter in economic storms.

This is because both companies are primarily cell phone carriers, not only cell phone carriers but dominant ones. They also own key Internet infrastructure, the long-distance fiber that connects Internet Service Providers to one another. They are managed very conservatively, and the focus is on dividends, so you are going to get a return.

VZ stock chart

Source: NASDAQ vs Verizon vs AT&T stock performance chart by amigobulls.com

AT&T, for instance, has kept its dividend on a slow, steady rise for years, regardless of short-term changes in earnings. Shareholders who got in five years ago, when the price was about $29, now enjoy a yield of about 6.4% on their money, based on the current dividend of $1.88/share. They have not, however, gotten much of a capital gain, with the stock closing at $33.95 on January 11.

Even during the 2008 economic crisis, AT&T kept bravely on. The share price was cut in half but the dividend, then 41 cents/share, was maintained throughout. If you bought near the bottom, at about $22, you’re getting almost 10% on your money now, compared with a U.S. 10-year bond rate of about 2.2%.

The story of Verizon stock has been similar. The annual dividend is up from $1.98 per share in 2012 to the current annual rate of $2.24/share. Earnings have been volatile – the company even reported a loss during the December quarter of 2014. But the dividend policy has remained in place. The stock, meanwhile, has gone up only from $35 to its present price of $45.09.

VZ stock chart

Source: Verizon stock price chart by amigobulls.com

These are companies that don’t take risks. The $130 billion purchase of the Vodafone (NASDAQ:VOD) stake in 2014 was not seen as a risk, but a consolidation of assets. The deal raised the company’s debt load from about 25% of assets to about 50%, which is double that of AT&T, and as a result, Verizon has been less aggressive about extending its wired fiber network, dubbed FiOS, to customers than AT&T.

Verizon has also sought some differentiation by buying AOL in a $4.4 billion deal that gives it an Internet ad network and some small play in content through sites like Huffington Post, TechCrunch and Engadget.  But on a market cap of $185 billion this move is not material. It is highly defensive in nature.

If I were to suggest you to buy one of these two stocks at their current levels, based on the criteria the two companies have set for themselves as investments, I would go with AT&T for the higher yield and lower risk profile. Dividends are what I want on stocks like these, and AT&T’s current yield of 5.73% is more attractive than Verizon’s yield of 4.99%.

But these are not stocks you trade. They are stocks you buy, you hold, and you retire on. When markets are volatile they represent safety, since the dividends are covered by earnings that are as reliable as any other Wall Street earnings can be.

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Author's Disclosures & Disclaimers:
  • I do not hold any positions in the stocks mentioned in this post and don't intend to initiate a position in the next 72 hours
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
Amigobulls Disclosures & Disclaimers:

This post has been submitted by an independent external contributor. This author may or may not hold any positions in the stocks discussed. Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. Amigobulls has not verified the author’s positions in the stocks discussed, and does not provide any guarantees in this regard. The author may be paid by Amigobulls for this contribution, under the paid contributors program. However, Amigobulls does not guarantee the authenticity or accuracy of the information provided by the author in this post.

The author may not be a qualified investment advisor. The opinions stated in the post should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Amigobulls does not have any business relationship with any of the companies covered in this post. This post represents the views of the author/contributor and may not reflect the views of Amigobulls.

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