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For income-focused investors, AT&T Inc. (NYSE:T) has long been a staple in dividend portfolios. With a forward dividend yield of 6.48% and a payout ratio of just 47.03%, the telecom giant appears to offer an attractive combination of high yield and sustainability. However, before rushing to buy shares of AT&T, it’s worth considering an alternative option that could potentially provide an even better short-term income play.
It’s true that AT&T has a strong history of consistent dividend growth, having raised its payout for 38 consecutive years until 2022 when it cut its quarterly dividend from $0.52 to $0.2775 per share following the spinoff of its media assets. But things are looking up for the company, with improved performance suggesting that dividend increases could resume in the near future.
AT&T’s Q1 2024 earnings release highlighted solid 5G and fiber customer additions, profitable growth driven by increased Mobility service and broadband revenues, and a significant year-over-year increase in free cash flow. The company also reaffirmed its full-year financial guidance, projecting 3% wireless service revenue growth, 7%+ broadband revenue growth, and free cash flow in the $17-$18 billion range.
Analysts seem to agree that AT&T is on the right track. The last three analyst ratings, released by Barclays, Scotiabank, and RBC Capital between April 11 and April 29, 2024, have an average price target of $19.83, implying a 15.51% upside from current levels.
So, with a juicy 6.5% yield, improving fundamentals, and bullish analyst sentiment, AT&T looks like a tempting buy for dividend investors. However, there’s one key factor to consider before pulling the trigger: the looming specter of a potential U.S. recession.
Many economists and market watchers believe that the U.S. economy is nearing a downturn, which could negatively impact stock prices across the board – even for relatively defensive names like AT&T. If a recession does materialize, there could be a better opportunity to scoop up shares of AT&T at an even more attractive valuation down the road.
An Alternative High-Yield Opportunity
In the meantime, income investors might want to consider an alternative option: Basecamp Alpine Notes. This short-term cash management tool, offered by real estate investing platform EquityMultiple, targets a compelling 9% yield with a brief 3-month term and a low minimum investment of just $1,000.
The beauty of Basecamp Alpine Notes is that they allow investors to earn a high yield on their cash while maintaining the flexibility to redeploy that capital when better opportunities arise – such as a potential recession-driven dip in AT&T’s stock price. Rather than locking up funds in AT&T shares today, investors could park their cash in Basecamp Alpine Notes, earn a 9% annualized return, and then have dry powder ready to fire when the time is right.
Basecamp Alpine Notes also offer a level of simplicity and predictability that can be appealing in uncertain economic times. With zero fees and monthly compounding, investors know exactly what return they can expect over the 3-month term. And with a strong track record of meeting all payment obligations, EquityMultiple has built a reputation as a reliable partner for income-seeking investors. Visit EquityMultiple’s website to learn more about Basecamp Alpine Notes.
Of course, no investment is without risk, and Basecamp Alpine Notes are no exception. As with any investment, it’s crucial to do your own due diligence and carefully consider how the notes fit into your overall financial plan.
But for investors who are eyeing AT&T’s 6.5% dividend yield and wondering if now is the right time to buy, Basecamp Alpine Notes offer a compelling alternative – a way to generate high short-term income while keeping your options open for future opportunities. In a market full of uncertainty, that kind of flexibility can be invaluable.
This article Thinking Of Buying AT&T For Its 6.5% Dividend Yield? Consider This Alternative Option originally appeared on Benzinga.com
Source: finance.yahoo.com