For income investors, it is very important to identify stocks that offer decent returns while promising consistent growth in the long term. AT&T (NYSE: T) is one of the Wall Street firms that meet all the criteria, making the stock attractive to investors. The telecom major has maintained a stable performance at the stock market over the years.
The positive momentum adds to the company’s overall stability and fundamentals. Those factors, combined with a 6.1% annual dividend yield, make the stock an investment option that one should not miss.
Though mounting competition and the rapid transformation the telecom sector is currently witnessing raise questions about the company’ growth prospects, AT&T thrives on its growing subscriber base, diversity of the services being offered and strong international presence. In the March quarter, weakness in the traditional business segment was offset by the expansion of the relatively new media division, after the acquisition of Time Warner, driving overall revenues up 18%. The steady subscriber growth and favorable pricing point to further strong growth in the coming quarters.
Not being a high-growth company in recent years did not prevent AT&T from creating value for shareholders and hiking the dividend regularly, something the company has been doing for more than three decades without a break. The impressive cash flow will help the company raise shareholder value and repay debt in the coming years while providing sufficient backup for investments in the industry that is currently in consolidation mode.
Shifting from telecom to the retail industry, the next best dividend paying company has a one-and-half-century-old legacy. Macy’s (M) stands out among its peers for staying resilient to the various challenges the retail sector and the broader economy faced over several decades. With a forward annual dividend yield of above 7%, the store chain operator is one of the most reliable Wall Street firms.
Though the relatively low-priced stock has been on a downward spiral for the last few years, it has a history is bouncing back from the lows. The past performance shows that once the stock starts recovering, it maintains the uptrend for long periods. That, together with the exceptionally strong fundamentals, is a perfect condition for long-term investment, especially when the stock is moderately priced. Many market watchers believe currently it is undervalued.
Maintaining the steady growth momentum, the retailer posted better-than-expected earnings in each of the trailing four quarters, with the latest profit growth exceeding the long-term average, which also translates into better return on equity. It is widely expected that Macy’s will continue to keep pace with competitors on the strength of its impressive cash position.
Pharma giant AbbVie (ABBV) is all set to acquire Irish pharma firm Allergan (AGN) in a $63-billion deal, after strengthening the oncology pipeline to counter the ongoing slump in the sales of its flagship arthritis drug Humira, which is facing exclusivity issues in key markets. The deal, touted as the biggest in the pharmaceutical industry, is expected to preserve AbbVie’s sales in Europe where it faces competition from biosimilars.
In the first quarter, oncology sales grew in double digits, benefitting from the ongoing growth initiatives, and offset the dismal performance of the other segments. That restricted the decline in revenues to just 1%. The stronger-than-expected earnings growth gave the company’s stock a much-needed impetus.
The emerging picture should bring cheer to shareholders, considering the affordability of the stock that is stabilizing at the pre-peak levels after retreating from the recent highs. Adding to the charm, AbbVie currently has an annual dividend yield of about 6%, which is almost double the average yield for the past five years.
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