AT&T (NYSE:T) looks like an oil company stock, with a yield that looks too good to be true. As trading opened April 23 AT&T stock was as trading at $29.50. Its 52-cent-per-share dividend now yields 7% if you buy now. By way of comparison, Chevron (NYSE:CVX), the second-largest U.S. oil company, has a yield of 6.3%.
The market considers AT&T a classic “yield trap.” That’s a stock that attracts income investors but isn’t may not be good for its promised income. It ended the March quarter with $147 billion of long-term debt. The capital spending budget is $5 billion/quarter. The dividend costs $3.7 billion/quarter. Free cash flow for the quarter was $3.9 billion. Management insists it’s committed to the dividend.
Source: InvestorPlace
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