Is AT&T really a Dividend Aristocrat?

A brief overview of AT&T’s history and line of business

AT&T was initially founded as the Bell Telephone Company by Alexander Graham Bell in 1877 and over few decades, the company would begin to develop and eventually became the American Telephone and Telegraph Company (AT&T) in 1983. Since then, AT&T has become the gigantic conglomerate holding company that we all know and is now the largest telecommunication company in the world.

AT&T is involved in three main fields of activity:

  • The biggest segment is AT&T Communications which mostly focuses on providing mobile phones, internet and wireless services to customers and businesses across the United States.
  • Another major segment of the company (at least for the time being) is Warner Media, that was purchased by AT&T in 2018 to expand its business beyond the elementary telecommunication services.
  • Finally, the last segment of the company is AT&T Latin America that has virtually the same objectives as AT&T Communications, but as its name implies, its services are aimed at people outside of the United States.

At the present time, AT&T reaches approximately 171 million customers each day thanks to its various platforms and is ranked number 11 on the fortune 500 list which ranks the largest corporations in the United States by total revenue.

AT&T: One of the greatest dividend-paying stocks on the market

If you have read our introduction to dividend growth investing, or if you already have some background knowledge of the subject, you probably know what criteria are necessary to be a dividend growth company and by taking a closer look at AT&T, you will see that this company clearly meets all the requirements.

Indeed, AT&T is a well-established company with a continuously growing business. It is a leading institution in the field of telecommunication and its initiative to purchase Time Warner in 2018 demonstrated the company’s dedication to growing its client base and strengthening its competitive edge in the industry. All of this partly explains why AT&T’s total revenue has practically always increased over the years and how the company has managed to stay highly profitable, in spite of the macroeconomic challenges encountered over the past two years.

Not only is AT&T a dividend growth company, but it is also a Dividend Aristocrat, meaning that it has raised its dividend for at least 25 years in a row. As a matter of fact, AT&T has constantly increased its dividend payout for the past 36 years and at the moment, it has a high dividend yield of more than 7%, making it very profitable for investors.

A Dividend Aristocrat that doesn’t raise its dividend

After continuously increasing its dividend for decades, it was with significant disbelief that investors realised that AT&T did not raise its dividend between November 2020 and February 2021, meaning that the company has gone seven straight quarters without increasing its dividend.

This sudden end to AT&T’s dividend increases results directly from the company’s decision to merge its Warner Media division with Discovery in order to create a new global entertainment company. Indeed, given that the Warner Media Segment accounted for a large part of AT&T’s revenue, it was thus self-evident that the company would have to adjust the dividend to reflect this change.

Darlène Babou, London School of Economics and Political Science (LSE)

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