Story Stocks®
Updated: 07-Apr-20 10:38 ET
AT&T poised for strong start after affirming commitment to dividend and highlights liquidity (T)
- AT&T (T) is indicated to open higher this morning after the company provided a financial update and outlined actions it has taken to bolster its liquidity. AT&T's solid financial footing is providing reassurance that the company is well-positioned to withstand a severe downturn caused by the coronavirus crisis.
- Investors are especially pleased that AT&T plans to continue paying quarterly dividends. This is notable because suspending dividends has become a very popular cash-preserving tactic during this crisis -- even for large, multi-national companies that are characterized as "defensive" names.
- Some examples of prominent companies that have suspended their dividends include Boeing (BA), Ford (F), Carnival (CCL), Delta Airlines (DAL).
- Additionally, AT&T's dividend yield is very lofty at 7.1%. In this turbulent environment, in which stability and valuation are highly-valued, AT&T's ability to pay a generous dividend is quite attractive.
- The company's strong cash position and liquidity give it the confidence to keep its dividend in tact. As of December 31, AT&T had $12 bln in cash on hand. In February, it secured another $4 bln from preferred stock issuances, and today it announced a $5.5 bln long-term loan agreement with 12 banks.
- As a final back stop, AT&T also has a $15 bln revolving credit line in place. Currently, the company does not anticipate using it.
- From an operational standpoint, the company is a beneficiary of the work-from-home and home schooling practices that have emerged from the pandemic.
- On April 5, wireless voice minutes jumped by 33% compared to a typical Sunday. Consumer home voice calling minutes of use were up 64% from an average Sunday.
- Core traffic, including its business, home broadband, and wireless usage, increased 23% on April 4 compared to a similar day at the end of February.
- AT&T says that its technicians have been working continuously on installations, repairs, and maintenance and that its networks are performing well, despite the surge in usage.
- One concern, though, is that the massive surge in unemployment could lead to a significant increase in missed payments and/or service cancellations.
