How does AT&T measure up when strictly considered as a utility company? To be able to answer the question, one needs to compare the company with one of the largest utility companies in the U.S. The first that comes to mind is DUK. This analysis uses data based on 1/27/2013 pricing therefore there may be a slight change to the numbers.
Okay then, here we go:
AT&T, Credit Rating, A-; DUK BBB+
AT&T, Dividend Yield, 5.29%; DUK 4.51%
AT&T, Debt-to-Equity 75.35%; DUK 96.61%
AT&T, P/S 1.5; DUK 2.81
AT&T, Enterprise Value/EBITDA, 5.67; DUK 13.18
AT&T, Payout Ratio 70%; DUK 75%
AT&T, Earnings growth rate 7%; DUK 3%
The conclusion from the data shown above is rather obvious. The AT&T stock offers a tremendous value at the going share prices when considered strictly a utility company. It is understandable why and how the company is in a big hurry to buy back shares given that they can barrow funds at cheaper rates than the dividends they pay out.
So that there is no misunderstanding of the analysis I showed, it is important to note that today's AT&T must be considered as a blend of high tech and utility. The first is the AT&T Labs incorporating the latest technological innovations to the data transmission and the second being the value delivered to the shareholders in the form of dividends, or as Randall calls it "the owners of the company." Taken together, it even makes a far superior investment yet.
It is important to note that today's AT&T Labs is significantly different than the evil empire of the former Bell Labs which was highly instrumental in the destruction of the former AT&T.
The following article from CSCO is extraordinarily noteworthy. Just in case you missed seeing it, here is the link:
What are we to infer from this market forecast? To be sure, not all wireless customers are/will be 4G intense data users but nevertheless, the data clearly shows good days are ahead for the AT&T stock.