T - AT&T

[Guest cherzeca]

I am surprised that I couldn't find a post on T.  wasn't even easy to put just a T in the subject line what with spell check

 

my question is that in trying to understand what is a "margin of safety" in a post Graham and Dodd 2019, isn't a dividend yield substantially more than 300 bps above the 10 year yield (and T's track record of sustainable and increasing dividends) the most reliable indicator of safety margin?

 

I understand chasing a dividend yield can be hazardous (see BDCs).  but I don't see it in the case of T.  I would suggest T for a portion of a portfolio that might otherwise be in short term treasuries.

[TwoCitiesCapital]

I am surprised that I couldn't find a post on T.  wasn't even easy to put just a T in the subject line what with spell check

 

my question is that in trying to understand what is a "margin of safety" in a post Graham and Dodd 2019, isn't a dividend yield substantially more than 300 bps above the 10 year yield (and T's track record of sustainable and increasing dividends) the most reliable indicator of safety margin?

 

I understand chasing a dividend yield can be hazardous (see BDCs).  but I don't see it in the case of T.  I would suggest T for a portion of a portfolio that might otherwise be in short term treasuries.

 

I've been watching and am interested, but do want to see some actual leverage reduction in action before pulling the trigger. They're not the same "utility" they were before so the debt makes me uncomfortable.

 

Also, anyone who thought it was a stand-in for short-term treasuries 12 months ago has been severely disappointed. I'd definitely cautioun treating them interchangeably.

[Guest cherzeca]

"Also, anyone who thought it was a stand-in for short-term treasuries 12 months ago has been severely disappointed. I'd definitely cautioun treating them interchangeably."

 

agreed, though that was 12 months ago. chart looks different now.

 

just to be clear, if dividend is sustainable (and I think it is even with leverage) then a share price floor around where we are now should be intact.  if dividend is reduced then my thesis is dead wrong. 

 

given a very good first Q for the equity market, I am looking for a little dividend-supplied protection going forward for the rest of year.  in my portfolio, which is abut 50% ST treasuries, I am hiving out a small portion of this cash for T...just to explain my thinking

[TwoCitiesCapital]

"Also, anyone who thought it was a stand-in for short-term treasuries 12 months ago has been severely disappointed. I'd definitely cautioun treating them interchangeably."

 

agreed, though that was 12 months ago. chart looks different now.

 

just to be clear, if dividend is sustainable (and I think it is even with leverage) then a share price floor around where we are now should be intact.  if dividend is reduced then my thesis is dead wrong. 

 

given a very good first Q for the equity market, I am looking for a little dividend-supplied protection going forward for the rest of year.  in my portfolio, which is abut 50% ST treasuries, I am hiving out a small portion of this cash for T...just to explain my thinking

 

Understood. The 12 month return/chart is the only reason I'm interested now. Just pointing out the metric used (dividend level and sustainability as a proxy for margin of safety) were both true then too - high yield relative to it's past and seemingly sustainable. They even raised it! 

 

Still didn't make it a good substitute for short-term treasuries because it dropped more. I'd expect it'd drop again if markets moved lower - hence my caution as a substitute for short-term treasuries. But as a conservative substitute to high multiple/high growth equities? Sure!

[Guest cherzeca]

"But as a conservative substitute to high multiple/high growth equities? Sure!"

 

I suppose that is what I am doing...while a small move out of cash can be viewed as an alternative to staying in cash, it can also be viewed as an alternative to moving into a spicier equity...not too eager to move cash into equities now, but a small move into T is a good alternative to your typical equity at or near highs

[johnny]

Have a position, similar coward's logic (better than being 50% cash). I'm not expecting them to knock it out of the park on anything in particular, but if you buy Netflix's market cap as being justifiable then you should feel good about owning HBO at these prices.

 

I'm skeptical about HBO being shaken up by a bunch of corpdorks whose primary insight seems to be "look at NFLX's market cap", so I wouldn't be here if they weren't available at a ~10% FCF yield. It's worth admiring how much cultural staying power HBO has a brand--they're able to stay in the same conversation as Netflix despite the vast differences in how they use capital. We'll see how the plan to convert the programming to 24/7 Game of Thrones spinoffs works out.

 

Nothing really much to add there, other than the yield here is higher than the 50y bonds; I don't think that really makes any sense.