3 stocks w yield 6% (att epr irm)

johnN

https://www.fool.com/investing/2018/08/16/3-stocks-to-buy-with-dividends-yielding-more-than.aspx


Stocks to Buy With Dividends Yielding More Than 6%
Who says you can't have a combination of stable income and growth potential?
Matthew Frankel, CFP®
(TMFMathGuy)
Aug 16, 2018 at 8:52AM

High dividends are nice, but dividends combined with excellent long-term growth potential are even better. If you think a dividend yield of 6% from a stock with lots of revenue growth potential doesn't exist -- think again. Here are three stocks that fit the description that you may want to take a closer look at.

Ted

@MFO Member " If you think a dividend yield of 6% from a stock with lots of revenue growth potential doesn't exist -- think again." The Linkster bought T on 12/19/11 @29.50 per share. The stock has had modest capital appreciation, about 2% per year, but I bought it for the very safe income of 6.75% a year.
Regards,
Ted

Old_Joe

Question: With respect to a stock, what is the basis for the percentage? For example, with T, the 6.75% is 6.75% of what? If the "what" is a company's earnings, wouldn't the percentage vary constantly as earnings either increase or decrease?

Ted

@Old_Joe: Dividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends $2.00 paid in a given year per share of stock held by the dollar value of one share of stock $29.50. $2.00 divided by $29.50 =6.7%. I'm surprised you didn't know that !
Regards,
Ted

Old_Joe

@Ted: Thanks for the quick answer. But perhaps I'm misunderstanding something here. I interpret your answer to mean that the % is related directly to what you actually paid for one share. If you had paid $14.75 per share, then your yield would be 13.4%? Since a stock price could vary significantly over a period of time, different owners would of course have different purchase prices, so the actual % would vary for each individual depending upon the purchase price?

I had thought that a company simply fixed the dividend at a certain price per share, as your example mentions. If so, that would of course mean that any given stock owner would in fact have a different % yield based upon his per-share purchase cost.

If that's true, then how can Matthew Frankel (see John's original post) claim that "the yield is "more than 6%" when that would vary depending upon the purchase price?

Perhaps he means that the yield would be "more than 6%" based upon the present stock price? If a particular company's stock price remained relatively constant over a long period of time, then his comment would be more understandable as there wouldn't be a great difference in the cost per share between most owners.

Ted

@ Old_Joe: You get an A+ in figuring dividend yield. You said, "f you had paid $14.75 per share, then your yield would be 13.4%? Since a stock price could vary significantly over a period of time, different owners would of course have different purchase prices, so the actual % would vary for each individual depending upon the purchase price?" You are correct. If you bought T today say at $33.16 your yield would be 6.0%, $2.00 divided by $33.16 =6.0%
Regards,
Ted

Mark

@OJ - I believe that the author was stating the yield based upon the price per share on the day he published the article. There's nothing wrong with that. YOC or yield on cost is basically just a feel good metric. For example, the current yield on MCD (McDonalds) is 2.50%. My YOC is 28.7%. Feels good don't it? However that YOC doesn't really serve any purpose when I'm evaluating an investment decision comparing MCD to similar companies/competitors. At present only the capital gains on MCD give me pause.

Edited to add: ED, an old poster on FundAlarm, used to snark on folks who brought up their YOC for a given investment. All that truly mattered was what an investment was currently yielding. I sure miss Ed. He had quite the sarcastic and intelligent wit.

Old_Joe

Thanks, @Ted and @Mark. I wasn't being snarky or critical; I just wanted to make sure that my understanding was correct. Yes, I remember Ed... always enjoyed his comments.

Ted

@Old_Joe: If you keep that up I might start to like you. Na !!!!
Regards,
Ted

P.S: He was a gem, but just like me at times he was a pain in the butt.

Old_Joe

@Ted- I'm sure that I qualify for that designation also. At times.

bee

After reading this passage, AT&T or T gives me pause:

...consider the mighty AT&T — now stuffed to the gills with an estimated $180 billion in debt following its $85 billion acquisition of Time Warner. It is, according to Moody’s, the “most indebted, non-government controlled, non-financial rated corporate issuer” and one now “beholden to the health of the capital markets.” In other words, the company is so indebted that chances are high it will need continuing access to the credit markets to refinance and pay back its mountain of debt as it becomes due.

This debt, in part is the 6% bond @Ted speaks of.
Source:
https://nytimes.com/2018/08/09/opinion/corporate-debt-bubble-next-recession.html

Old_Joe

@bee- Yes, that's true, but then again it seems unlikely that they won't have the income to deal with that debt. Unless of course they also need to invest zillions in whatever new and great 27G comes along next, in which case who knows?

BTW, we weren't considering an AT&T bond- it was dividend income that we were looking at.

bee

@Old_Joe...my bad. Hopefully the cash that pays the stock dividend is not under pressure by the obligations of the bonds.

Old_Joe

Amen!

circa33

circa33
please compare Centurylink CTL with T CTL has an 11% dividend
I purchased some at $18.00 a share.
REGARDS to BEE and all