As I write this, shares of AT&T Inc. (T) are rising after it met earnings expectations for the fourth quarter. According to company leadership, 2016 was a “transformational” year for the telecommunications giant. For starters, this was the first full fiscal year after the 2015 acquisition of DIRECTV. Compared with 2015, revenues jumped 11.6% to $163.8 billion and earnings per share climbed 4.8% to $2.84.
Last quarter alone, AT&T added 2.8 million new wireless subscribers across North America, and 200,000 new subscribers to its DIRECTV Now service. This translated to solid sales and earnings. AT&T had adjusted earnings of $0.66 per share on $41.8 billion in revenue. This was in line with analysts’ earnings estimates, and just a hair below the consensus sales estimate of $42.0 billion.
Looking ahead to FY 2017, management remains upbeat. AT&T Inc. is targeting sales growth in the low-single digits and adjusted EPS growth in the mid-single digits. This is in line with the Street view of 1.5% annual sales growth and 4.2 earnings growth. The company has also planned $22 billion in capital expenditures.
I currently recommend AT&T in my Blue Chip Growth newsletter, partly due to its strong fundamentals and party due to its hefty dividend. In fact, its 4.6% dividend yield is the highest on the Buy List right now. AT&T also has an excellent dividend track record going back to 1984. This, combined with a 4.7% dividend yield, still makes AT&T a solid dividend stock.
The stock also trades at less than 14 times forecasted earnings, which is a reasonable valuation by industry standards. In light of its earnings announcement and generous dividend, I recommend AT&T as a B-rated Buy.