In their 8K filing, AT&T states that they have closed the global bond offering maturing in 2043 for the equivalent amount of $1.56B carrying interest rate of 4.25%. Overall, I would rate this move as positive although the rate seems a bit on the high side and also would have expected the face value to be larger than what is stated in the May 15th filing but still this is a positive move to take advantage of the current low rates. Going by the Friday's stock price action, the market doesn't seem to positively have reacted to this offering given that there are many moving parts to affect the stock price the most important one being competition such as DISH, Sprint, you name it. I am not terribly thrilled about VZ and the hoopla generated in the press and do not agree with the optimism expressed by Barclay.
Sooner or later, people who are on the buying side will run out of stocks to buy never mind the healthy dividend. All the utilities are up. It is given that this stock will go up. Will it hit the $45.00 mark? Perhaps but the $42.00 mark should be reached without any difficulties.
The word "command" should read "commend." My apology for the error since I do not want to be accused of being from NJ where English is the optional language. Also, the word "Rational" should read "Rationale."
From HOLD to STRONG HOLD.
Right and left, investors are rushing to buy dividend yielding stocks to the point that, today, 3% yield would seem favorable in a continuing deflationary environment we are in. As a result, the dividend yielding stocks are in high demand. We are gradually reaching a point where even the utilities such as DUK, SO, etc. have posted sizable gains in stock price driving the yield closer to the 4% mark. Unlike these utilities where there is absolutely no growth, AT&T is expected to grow earnings in high single digits with track record of increasing the dividend as they have done during the last 25 years.
Okay then, why do investors prefer to stay away from investing in this stock? Simply stated, people keep thinking this is still the AT&T of Bob Allen, Greg A. Smith, Jerry Mulyk and of course who can ever forget the dinasore called BELL LABS, IMO. No more of these incompetent managers and gone are the golden days of BELL LABS where the sky was the limit for spending without observable accomplishments. In fact, one of the major achievement of today's AT&T was to ditch BELLLABS. I command those individuals for having made such a brilliant move.
Caution- The above is just one man's own opinion and interpretation. Always do your own DD. The author holds a position in the AT&T stock.
Good point, a liability that is not measurable especially when dealing with unions. With today's internet trading of stocks, the employee would be wise to get on board and take charge. Granted the PBGC does provide some safety but trying to collect for insured funds could turn out to be a big hassle.
Pension Funds are misused and abused by management, in part because of the changes in laws of which enabled companies to use what was then "surplus" which took place several decades ago. In fact, one of the arguments raised in the AT&T breakup was the powerful pension fund then of which was thought out to be as powerful as the U.S. Treasury. Today, the pendulum has swung in the opposite direction creating monumental problems in figuring out exactly what the liabilities are, never mind the fact that they have a terrible time in earning a reasonable returns on invested funds in a skyrocketing stock market. Take a look at the IL Pension Fund, with shortfall approaching the $100.00B mark.
I believe moving to Cash Balance type of a plan is a move in the right direction coupled with the fact that less and less companies continue to have the traditional plans anyway. It is fair, easily understood, simplifies the accounting immensely.
The calculus of borrowing isn't that easy. Borrow tons of money do buybacks and then what? You are locked in and owe the money indefinitely while there is considerable more flexibility with the dividends. Nothing prevents a company from reducing the dividend while if the company has outstanding bonds, forget it. Not much can be done there. If AT&T's approach made economic dollars and sense, all companies would rush to do the same.
To be sure, the case of AAPL is entirely different with the proceeds to do buybacks/dividends. How? AAPL has the funds in international markets and by issuing bonds, they have achieved "tax avoidance," entirely different matter, no similarities whatsoever.
Far too many unknowns as to how the funds will be used:
1. Refinance debt;
2. CPAX; and
3. Buyback shares.
CS views this move to be a slightly negative since it is unknown how these funds will used and more importantly yet what rates will do in the long run. If the long term rates go down further, the recall of these bonds will be highly problematic and vice versa. It is a gamble on long term rates to say the least.
CS estimates this offering to be in the order of $10.00B.
Appears to minimize the risks for the employer and makes the lump sum distribution routine. AT&T and IBM were cited as companies participating in this plan, gradually gaining popularity nationwide. Surely, it is possible to argue the pros and cons of this methodology depending on whether you are the employee or the employer.
Insiders are busy selling. Although this can't be generalized as a huge negative, nevertheless, it can't be a positive either.
IMO, he strikes me as a confused individual, totally unrelated to his current job.
Did the markets soften so unexpectedly? NO. Internal forecasts should have seen this. Having said that, he should have lowered expectations significantly, much more so than he did.
It remains to be seen what the company will do when the credit downgrade is announced. It is given that the borrowing costs will rise of which will impact the earnings, cash flow and so on. The insiders heavy selling is beginning to make dollars and sense.
Target price $34.00 plus tax.