October started with a highly volatile stock market due to uncertainties around potential monetary policy changes and supply chain constraints. However, the major stock indexes performed well later, with a solid start to the third-quarter earnings season, a decline in initial jobless claims, and declining COVID-19 cases.
The Dow Jones Industrial Average and S&P 500 closed at record highs on Monday. According to FactSet, of the 23% S&P 500 companies that had reported earnings as of October 22, 84% have exceeded consensus EPS estimates, which is above the 76% five-year average.
However, given the supply chain disruptions and rising inflation, the market may witness further volatility. Therefore, since dividend-paying stocks can reduce overall portfolio risk and volatility, we think they could be ideal bets now. Considering the S&P 500’s solid performance and expected market volatility in the near term, it could be wise to add S&P 500 members AT&T Inc. (T) and Altria Group, Inc. (MO) to one’s portfolio. The dividends paid by these stocks yield more than 7%.
AT&T Inc. (T)
Incorporated in 1983, T in Dallas, Tex., offers telecommunications, media, and technology services. The company operates through three segments—Communications; WarnerMedia; and Latin America. Its segments offer wireless and wireline telecom, video and broadband services, advertising services, and wireless services in Mexico.
T declared a $0.52 quarterly dividend, payable on November 1, 2021. The stock distributes a $2.08 per share dividend annually, which translates to an 8.11% yield. The company’s dividend has grown at a 1.6% rate over the past five years.
This month, T and Frontier Communications entered a strategic partnership to deliver fiber-optic connections to large enterprise clients outside of T’s current footprint. With this collaboration, T intends to provide high-speed, low-latency, and highly secure access to large corporate customers in markets where it does not currently own or plan to develop a fiber network.
T’s net income increased 98% year-over-year to $6.27 billion for the third quarter ended September 30, 2021. The company’s total operating revenues under the Communications Segment grew 3.8% from its year-ago value to $28.22 billion. Its revenue under the Mobility sector rose 7% from the prior-year quarter to $19.1 billion. Also, under this segment, the company’s EBITDA increased 3.6% year-over-year to $7.99 million.
T has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to grow 5% in the current year. Its stock price has increased 1.2% in price over the past five days.
T’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has a B grade for Value and Stability. We’ve also graded T for Sentiment, Momentum, Growth, and Quality. Click here to access all of T’s ratings. T is ranked #2 of 21 stocks in the Telecom – Domestic industry.
Altria Group, Inc. (MO)
MO manufactures and distributes cigarettes, oral tobacco products, and wine in the United States. The Richmond, Va., company offers products under the Marlboro, Black & Mild, Copenhagen, Skoal, Red Seal, and Husky brands. In addition, MO provides finance leasing services primarily to the transportation, power generation, real estate, and manufacturing equipment industries.
MO paid a $0.9 quarterly dividend on October 12, 2021. The stock distributes a $3.6 per share dividend annually, which translates to a 7.51% yield. The company’s dividend has grown at an 8.6% rate over the past five years.
During the second quarter, ended June 30, 2021, MO’s net revenues increased 8.9% year-over-year to $6.94 billion. The company’s gross profit grew 13.5% from its year-ago value to $3.73 billion. Its operating income rose 13.9% from the prior-year quarter to $3.19 billion. Also, the company’s net earnings increased 10.9% year-over-year to $2.15 million.
MO’s revenue is expected to increase 1.9% year-over-year to $21.24 billion in its fiscal year 2021. The company has an impressive earnings surprise history; it beat consensus EPS estimates in three of the trailing four quarters. Also, its EPS is expected to increase 6% in the current year. Furthermore, the stock has gained 14.3% in over the past nine months and 22.7% over the past year.
MO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Quality, and a B for Stability and Momentum.
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T shares were trading at $25.64 per share on Tuesday morning, down $0.00 (0.00%). Year-to-date, T has declined -4.21%, versus a 23.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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