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AT&T | High dividend yield stock at attractive price

Current price – $16.09
Target price – $19.72
Growth potential – 22.6%🔥
Dividend yield – 6.96%💵
Investment horizon – 1 year
☎️AT&T is the world's largest telecommunications company, providing fixed and cellular communications services in the USA and a number of other countries. The company underwent a significant transformation last year, which had a positive impact on its financial results. However, its shares are still trading at an attractive valuation and offer a high level of dividend yield. The fair value of AT&T stocks is $19.72, upside is 22.6%. Dividend yield – 6.96%.
Investment thesis

🔼 Cheap valuation. For the 4Q2023 AT&T showed revenue growth of 2.2% y/y to $32 bln. This was facilitated by an increase in the number of subscribers. Adjusted earnings per share decreased from $0.61 to $0.54. At the same time, the company increased free cash flow in 4Q2023 by 4.4% to $6.4 bln, and for the full year by 7% y/y to $38.3 bln. This indicator is of particular interest for a dividend stock. AT&T is valued at just 7.4 expected annual earnings, which is significantly below the industry average (12.75) and also below its own 5-year average (8.3).

🔼 Dividends. AT&T offers a fairly high dividend yield. At current quotes it is near 7%. Even though the Fed's rate cut has been delayed, it is still expected to be cut before the end of the year. In such a situation, it is beneficial for the investor to lock in a high level of dividend yield.

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