You may find yourself looking at AT&T (NYSE:T) for its income. But it’s what T stock is doing off and on the price chart that’s going to keep tomorrow’s investors satisfied. Let me explain.
Investors should all be sure to have a bit of positioning in a defensive name like AT&T. And in a market seemingly held hostage by tit-for-tat trade war actions between the U.S. and China, T stock’s plus 6% dividend certainly has an allure to it. But that kind of payout should also serve as notice to T stock investors.
Bottom line, today’s AT&T isn’t your traditional widows-and-orphans investment. Ultimately, T stock could be a dividend trap. But that’s not to say AT&T isn’t a good purchase either.
More than an income-generating vehicle, T stock is a bet on the company’s aggressive reshaping of its business. It’s been a costly venture with mounting debt helped along by acquisitions of DirecTV and Time Warner. And if push comes to shove in its efforts to grow in today’s marketplace against competitors such as Disney (NYSE:DIS), Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN), T stock’s income stream will invariably be at risk.
But again, that doesn’t make T stock a bad investment. Rather, AT&T is becoming a stock with different, but potentially stronger prospects.
The reward for T stock investors is future growth. As InvestorPlace’s Laura Hoy recently wrote, the end-game for T stock is a powerful ecosystem of connectivity and streaming media under one umbrella. Time will only tell if AT&T succeeds. But based on the longer-term price chart, it’s looking like business as usual, one way or the other, for bullish investors.
T Stock Monthly Chart
The provided price chart is the monthly view adjusted for dividends in T stock. It shows a very supportive price trend following last year’s successful test of AT&T’s turn-of-the-century high and 38% retracement level.
Until now, dividend payouts have accounted for a large part of this bullish-looking trend. And those quarterly distributions aren’t going to simply disappear overnight. More importantly, if we’re correct in seeing a continuation of this price action, over time T stock’s gains and shareholder wealth could be the result of growth rather than an income stream.
My suggestion for investors is let the accountants down the road figure out the mix of income and capital appreciation. For today, I’d put T stock on the radar to buy on momentum above $33.09 as a fresh relative high is made. But if that type growth isn’t in the cards just yet, enjoying AT&T for a larger and more secure dividend payout after a pullback towards support might be entertained as well.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits and feel free to click here to learn more about how to design better positions using options!
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