AT&T (NYSE: T) is among the oldest businesses listed on the American stock market. The company provides outstanding value to its shareholders with generous dividend payments. Some investors might complain about the performance of T stock in 2022, and they may point out a recent lawsuit against the company. However, I am bullish on AT&T stock as informed investors should see an irresistible bargain here, not a reason to panic sell.
Based in Dallas but global in scope, AT&T is a giant in the telecommunications, media, and technology services industries. Telecommunications companies have been under pressure for much of this year due to economic headwinds. Consumers are less likely to upgrade their phone and internet services, for example, if inflation is elevated.
Yet, if any telecom business should be able to withstand tough economic times, it’s AT&T. Besides, its stock presents an opportunity that simply can’t be ignored but might not last much longer.
AT&T Finally Settled a Major Lawsuit
First things first – there’s a development that must be addressed. From Bloomberg to Reuters, it seems like practically every news outlet is reporting on this piece of news now. Specifically, the Securities and Exchange Commission (SEC) filed a lawsuit against AT&T, claiming that the company had selectively leaked financial information to Wall Street analysts.
Granted, it’s not unusual for large corporations to have various lawsuits filed against them. When it’s from the government, however, it’s a problem that investors can’t afford to ignore. After all, it’s awfully difficult to fight the government and win.
The SEC’s lawsuit dates back to March 2021. It alleges that AT&T and three investor relations executives had disclosed details about the company’s smartphone business to 20 firms; this could create an unfair investment information advantage for those firms.
Fortunately for AT&T’s investors, the company recently agreed to pay a $6.25 million penalty to settle this lawsuit. Really, that’s not a massive penalty for a gigantic company like AT&T. Plus, AT&T won’t have to admit or deny the SEC’s allegations. All in all, it sounds like the company won’t have to pay a huge price and will be able to keep its reputation intact.
AT&T Stock: Currently Appropriate for Almost Any Portfolio
Now that AT&T has gotten the government off of its back, prospective investors can focus on the company’s excellent value proposition. Some folks might pigeonhole T stock as a “safety stock” because the U.S. might enter into a severe recession soon, and AT&T has proven its ability to survive economic downturns.
T stock has a beta below 1, which means that it has historically moved slower than the S&P 500 (SPX), so it’s not highly volatile or risky. Its five-year monthly beta of 0.72, so shareholders won’t be exposed to drastic price moves even if there’s a recession underway.
Maybe you’re a passive income investor, and if so, then I’ve got some great news for you. AT&T offers a forward annual dividend yield of 5.84%, and that’s a nice bonus for long-term shareholders. Personally, I like to use the strategy of reinvesting dividend distributions into more shares of the stock in order to maximize the potential returns.
Perhaps you’re obsessed with deep value, which I totally understand. In that case, you’ll be happy to know that AT&T’s trailing 12-month P/E ratio is quite low, at just 7.7x. That’s the type of value proposition you should be looking for if you’re worried about a recession. Furthermore, with T stock, you’d be taking a stake in a rock-solid business. As AT&T Senior Vice President and CFO Pascal Desroches recently assured, the company expects to meet its free cash flow guidance of around $14 billion for the year; moreover, AT&T intends to continue paying an attractive dividend.
Is AT&T a Good Stock to Buy, According to Analysts?
Turning to Wall Street, T stock comes in as a Moderate Buy based on six Buys and seven Hold ratings. The average AT&T price target is $20.20, implying 7.9% upside potential.
Conclusion: Should You Consider AT&T Stock?
There’s no such thing as a “perfect” investment, but AT&T stock is about as close as you can get. It’s appropriate for many different types of financial traders and for practically any account size. So, there’s no need to let the government’s lawsuit against AT&T worry you, as this is now in the rearview mirror. It’s time to look to the future and consider T stock for healthy dividend payments, deep value, and exposure to a worry-free telecommunications giant.
