Author Topic: Dividend Stocks- AT&T, Verizon, Why not?  (Read 6128 times)

wealthviahealth

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Dividend Stocks- AT&T, Verizon, Why not?
« on: October 06, 2014, 09:47:21 AM »
I am still in rookie territory as it relates to dividend investing but am making efforts to learn more each day.

I noticed that AT&T's dividend is 5.20% and Verizon's is 4.43%
These both look like great dividend stocks to me but I am wondering if there is something here that I am missing as to why these
both might not be as sound as they look.

I will not be purchasing these in a tax advantaged account but I can purchase them commission free so my strategy would be to DCA and purchase shares in small batches every few weeks. Feel free to advise or even point me in a different direction if you see fit.

Left

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #1 on: October 06, 2014, 10:54:04 AM »
those are fine, I just prefer a dividend index for the spread, a bit less dividend pay out but I get to sleep better at night not relying on a single company too

Dodge

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #2 on: October 06, 2014, 11:13:25 AM »

I am still in rookie territory as it relates to dividend investing but am making efforts to learn more each day.

I noticed that AT&T's dividend is 5.20% and Verizon's is 4.43%
These both look like great dividend stocks to me but I am wondering if there is something here that I am missing as to why these
both might not be as sound as they look.

I will not be purchasing these in a tax advantaged account but I can purchase them commission free so my strategy would be to DCA and purchase shares in small batches every few weeks. Feel free to advise or even point me in a different direction if you see fit.

Why do you want dividend stocks?

Jags4186

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #3 on: October 06, 2014, 12:21:17 PM »
I would say the 1 advantage of a dividend paying stock is access to its capital without having to sell shares.

RyanAtTanagra

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #4 on: October 06, 2014, 12:35:29 PM »
Why do you want dividend stocks?

If you're baiting, please don't, we all know the counter opinions on dividend investing.  I'm at the same stage as OP and am interested in answers to his inquiry.

If you're genuinely curious, ignore the above.  If you a topic search for 'dividend' in this subform, it's been discussed and debated at length many times, there's usually good info that pops up with links to more.  There's a fairly recent and good discussion over at the ERE forums as well.

Dodge

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #5 on: October 06, 2014, 12:46:09 PM »
Why do you want dividend stocks?

If you're baiting, please don't, we all know the counter opinions on dividend investing.  I'm at the same stage as OP and am interested in answers to his inquiry.

Wealthviahealth says he/she is in "rookie territory", and willing to learn.  I won't assume he/she knows anything about the arguments and data showing that investing in AT&T, Verizon, or any other dividend stock is a horrible idea :)

RyanAtTanagra

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #6 on: October 06, 2014, 12:53:48 PM »
Wealthviahealth says he/she is in "rookie territory", and willing to learn.  I won't assume he/she knows anything about the arguments and data showing that investing in AT&T, Verizon, or any other dividend stock is a horrible idea :)

But IF they were baiting then they were assuming that the OP needs to be told how pointless dividend investing is by derailing his thread (which we are now doing anyway argh).  It just happens all the time and it gets old.

Jags4186

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #7 on: October 06, 2014, 12:55:08 PM »
I am still in rookie territory as it relates to dividend investing but am making efforts to learn more each day.

I noticed that AT&T's dividend is 5.20% and Verizon's is 4.43%
These both look like great dividend stocks to me but I am wondering if there is something here that I am missing as to why these
both might not be as sound as they look.

I will not be purchasing these in a tax advantaged account but I can purchase them commission free so my strategy would be to DCA and purchase shares in small batches every few weeks. Feel free to advise or even point me in a different direction if you see fit.

The real answer is it doesn't matter if you have a dividend paying stock or a non dividend paying stock.  When a stock pays a dividend you will see a correlating drop in share value.  You are still gambling on an individual stock.  Nothing is keeping AT&T from going from $35 to $20 a share.  How much do you care about that 5.5% dividend now?

The other issue is that companies that pay a high dividend TEND to be in similar industries.   If something affects that industry your entire portfolio would be destroyed.  I know because I previously chased dividends and held tons of REITs and Oil Trusts.  It's great that they paid 10%/15% dividends but when they dropped 35% in value while the broad market seemingly increased 20% year in and year out the past 5 years I wasn't feeling too great.




Dodge

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #8 on: October 06, 2014, 12:59:12 PM »
Wealthviahealth says he/she is in "rookie territory", and willing to learn.  I won't assume he/she knows anything about the arguments and data showing that investing in AT&T, Verizon, or any other dividend stock is a horrible idea :)

But IF they were baiting then they were assuming that the OP needs to be told how pointless dividend investing is by derailing his thread (which we are now doing anyway argh).  It just happens all the time and it gets old.

It's cool, I understand the frustration when a thread you're interested in gets derailed.  Let's see what the OP has to say.  Surely if he/she says something like "access to its capital without having to sell shares", you wouldn't consider it out-of-line to explain, to a rookie, that running out of shares is not an issue with a market index mutual fund, and is actually much more likely to occur when buying AT&T.  Right?

If OP says he/she already knows the relevant information, and chooses to ignore it, I'll drop it.

shitzmagee

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #9 on: October 06, 2014, 04:21:44 PM »
OP, keep in mind that dividend % is only one variable. My advice is to not make investment decisions based on that one variable. If you're building a dividend portfolio and looking at individual stocks, look for companies that have a long history of increasing their payout each year on top of all the other indicators for whether or not a particular company's stock is currently a good value. And don't forget to stay diversified while you do that.

If all you do is buy stocks because they pay high dividends, you may miss some important indicators that that company may be a higher risk than you are willing to take or that the stock's current price isn't a good value at the moment.

You'll have to determine for yourself how AT&T or Verizon fit into your portfolio. One size doesn't fit all.

daverobev

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #10 on: October 06, 2014, 06:07:45 PM »
I was reading an article somewhere showing profitability is in decline in phone companies.

Something about booking the full price of a subsidised phone when the contract is signed. Rather than as the money comes in.

IMHO T looks too good to be true - low p/e, etc - 'the market' isn't stupid, these companies aren't all they appear.

Probably you'd be better off with a divi grower. GE maybe. MCD. KO.

foobar

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #11 on: October 06, 2014, 08:12:17 PM »
I am still in rookie territory as it relates to dividend investing but am making efforts to learn more each day.

I noticed that AT&T's dividend is 5.20% and Verizon's is 4.43%
These both look like great dividend stocks to me but I am wondering if there is something here that I am missing as to why these
both might not be as sound as they look.

I will not be purchasing these in a tax advantaged account but I can purchase them commission free so my strategy would be to DCA and purchase shares in small batches every few weeks. Feel free to advise or even point me in a different direction if you see fit.

Lets look at Total return of AT&T versus the S&P 500
1 year 10.58 vs 18.64
5 years 10.66 vs 15.66
10 years 6.53 vs 7.8
15 years .62 vs 4.62

You are buying a stock that has underperformed the market for 15 years. Why do you think the next 15 years will be different?  Telecom has been a horrid sector for a long time. The cost of upgrading the networks has been brutal and shows no sign of slowing down.

akdfjlkajsd;lkfjs;lk

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #12 on: October 09, 2014, 08:57:27 AM »
As someone who invests in dividend growth stocks, I've stayed away from T and VZ for now, simply because their dividend increases don't really keep up with inflation. Because they pay out so much FCF in dividends, there's not all that much room to increase the dividend appropriately. If I want to retire on my dividend stream, I want it to exceed inflation, so I don't sacrifice my standard of living over time. I just don't really see that happening with phone companies. Maybe when I'm really old (65+), the high income will be more appealing. But for now, I want those solid dividend increases. Maybe JNJ or PM are better choices.

As an aside, of the two, I like VZ over T. T hasn't done squat for a while, especially in terms of capital appreciation. VZ at least has some growth and FIOS. Conversely, T has been paying an increasing dividend nearly 3 times as long as VZ. Either way, both their Chowder numbers are terrible, so I'm passing.

wealthviahealth

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #13 on: October 11, 2014, 07:30:49 AM »
I really appreciate all of the great feedback on this. After reading the comments and going back and looking at charts , I can see how something like At&T historically has underperformed and returned less
that a solid go-to like VTI.   

hexdexorex

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Re: Dividend Stocks- AT&T, Verizon, Why not?
« Reply #14 on: October 12, 2014, 04:52:19 PM »
Att is paying a lot for dtv and I do not think paid tv is a great business for them to double down in. VZ just paid a fair price to vodaphone for the remaining 45% of its business. I guess you can see which one I prefer. Even if tmobile drives mobile revenue lower tablets/cars are coming online and will be a great revenue source in the future. Most people I speak to at ATT or Verizon never switch....I think they had their first customer loss last quarter and it was a slim one....way over taken by their tablet additions. If they really have to go toe to toe with other companies on pricing there is plenty of room to cut in their business model.