Old Ma Bell has gotten a new lease on life. For many investors, AT&T, rather remarkably, has become a sexy growth company once again. Enthusiasm is building, and several commentators have labeled it a top pick or must own company.
Shares have been moving, albeit slowly, higher, and are now approaching new all time highs. The company is forecasting full-year earnings around $2.68 per share, leaving it at a modest 13 PE ratio. Ignore the financial data you see on investing websites, it fails to account for the company’s recent merger with DIRECTV.
On top of that 13 PE ratio, you get a starting 5.6% dividend yield, with another dividend hike expected shortly. The combination of low valuation, high dividend yield, and newly added growth kicker, to some, seems irresistible.
Let us take a look at the positives, and then consider the potential drawbacks. The growth story is built primarily around international expansion.
The Mexican government recently forced the country’s near-monopolistic telephone operator, America Movil, to allow more competition. America Movil, which currently controls 70% of the market, will be forced to cut its market share to 50% or less.