Does AT&T Stock Offer Safety From The Crash?

  • AT&T stock has advanced while the market has fallen flat.
  • The fat dividend helps. Its ability to pay that dividend helps more.
  • This is why you keep defensive stocks in your portfolio during times like these.

When markets fall, traders get defensive. They look for high dividends and wide moats. They pay big for them.

Few stocks represent shelter from a storm as well as AT&T (NYSE:T) and that is proving to be the case again. Since the start of the year AT&T stock is up 6.7%, while the S&P 500 is down 6.4%.

T stock chart

Source: AT&T stock price chart by

AT&T reported earnings a week ago and the numbers were on par. Net income of $4 billion, 65 cents per share, and revenue of $42.1 billion, allowed ample margin for the 47 cent dividend that now delivers a yield of 5.32%. That’s an oil patch yield without the oil patch risk.

AT&T, which is actually the former Southwestern Bell and not the “Ma Bell” of the distant past, does not move quickly. It is not nimble. But it is a decent operator and continues to enjoy a duopoly on mobile service with Verizon (NYSE:VZ) at a time when mobile data is very hot. (I like to say we’re in the golden age of radio since phones are essentially digital radios.) AT&T maintains high market share and solid margins in this business.

This is important because the landline business is a mess. Phone lines are thinner than cable lines, the upgrade path requires running fiber under streets using trucks, and AT&T lacks the content deals necessary to compete with cable operators such as Comcast -A (NASDAQ:CMCSA) anyway. But in defensive times like these, that is a blessing in disguise. As media assets are being devalued by the market, stocks like Comcast have joined the general market slump, while AT&T stock continues to ride high.

This doesn’t mean there aren’t voices in the AT&T boardroom preaching the value of change. There were reports last week that AT&T was pursuing media deals, alongside a distress sale of its Latin American assets.

If it were to pursue this strategy it would be following rival Verizon, which bought AOL, so perhaps there is a wish here that AT&T might be interested in Yahoo (NASDAQ:YHOO), which is refocusing on the fact that U.S. Carriers have always been jealous of cable operators’ vertical integration, especially when it comes to the Internet. They’re stuck selling bits while the “broadcast” side reaps the benefits, and the net neutrality debate has always been about carriers shaking down dominant broadcasters for a piece of that action.

Waiting for AT&T to move on anything, however, is like waiting for Godot. AT&T is still in the process of swallowing DirecTv, and is unlikely to be interested in any big meals any time soon. When it does, it will be making a defensive play, not an offensive one.

For an investor, however, this is fine, especially at times like this. This is a time when those who practice diversification are reaping big benefits, and AT&T stock is a perfect defensive holding within a diversified portfolio. You won’t look smart when the economy is booming, but at times like these, when the market’s storms are raging, you’ll find shelter with the AT&T stock.

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  • 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.
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