The stock market has been enjoying a notable bull run for over a year and a half, with the S&P 500 index climbing nearly 48% since the close of 2022. While economic recoveries typically outlast downturns, savvy investors remain alert to the possibility of an impending bear market.
As we move into September, a month often characterized by market volatility, seasoned traders might consider it an opportune time to acquire reliable dividend stocks. After two months of positive market performance, traders returning from summer vacations might be inclined to capitalize on profits, potentially leading to market fluctuations.
In this context, AT&T (NYSE: T) stands out with an appealing 5.4% dividend yield—a figure that offers a cushion even if market conditions become less favorable. AT&T’s recent performance suggests a solid investment opportunity.
The Resurgence of Broadband Services
The telecommunications sector may not be the most exhilarating area in the market, but it attracts income-focused investors thanks to the consistent cash flow generated by established providers. AT&T has recently witnessed a turnaround in its broadband division after a period of subscriber losses. Following the introduction of its fixed wireless service, AT&T has successfully added thousands of new broadband subscribers in recent quarters, driving a 7% year-over-year increase in total broadband revenue.
Moreover, wireless service revenue also saw a healthy 3.4% growth thanks to an impressive retention rate among customers. This positive momentum signifies a stabilizing trend for AT&T’s income streams.
Looking Past Short-Term Challenges
The company faced challenges in 2022 when it cut its dividend to manage debt and streamline operations after divesting from unpredictable media segments. However, analysts anticipate that AT&T could resume annual dividend increases in 2025 as it works to reduce its considerable debt burden. With a recent report indicating over $21 billion in free cash flow during the past year, AT&T comfortably covers its dividend obligations while still allocating funds toward reducing its debt levels.
Currently, AT&T’s net debt stands at $127 billion, representing a manageable ratio in relation to its adjusted earnings before interest, taxes, depreciation, and amortization. The management team aims to decrease this ratio to 2.5 in the near term, setting the stage for potential dividend growth in the coming years.
Preparation for Strategic Buying Opportunities
Even with a 23% increase in its stock price this year, AT&T’s dividend yield remains significantly higher than the average yield offered by other S&P 500 stocks. As an added incentive, investors may benefit from purchasing AT&T shares at a more favorable price if the stock experiences a dip this September. Adding this stock to your watchlist with the intention of buying on a pullback might generate considerable passive income over time.
If you’re contemplating whether to invest $1,000 in AT&T, keep in mind that notable stock experts recently listed their top ten stock picks for investors; however, AT&T did not make the final cut. This highlights the importance of doing thorough research and considering diverse perspectives when making investment decisions.
In conclusion, the current climate could be a strategic moment for investors to capitalize on AT&T’s impressive dividend yield and its improving operational metrics. By staying attuned to market movements while maintaining a long-term focus, investors can position themselves for potential gains ahead.