AT&T or Verizon? Which Is Best for Your Portfolio Right Now?
I’ve been getting this question a lot, especially after I launched my Dividend Quick Start Video Series (if you haven’t seen it yet, you can view it here).
In the fourth video, I name AT&T (T) as one of my favorite Current Yield positions. It currently yields 6.4% and the company is at the tail end of a transformation period.
How does it stack up against the other major telecoms?
I am incredibly bullish on telecoms. Literally everything we do revolves around data. It’s all made possible by data whizzing from one point to another through the datasphere.
We can speculate about the future of flying or self-driving cars, or if AI and robots will take over society. In the end, it doesn’t matter where technology takes us next or how long it takes to get there—it’s going to require the exchange, analysis, and storage of huge amounts of data.
The winners will be the telecom companies. They operate the data toll roads. And they will have to be paid to keep the data flowing. There are only a handful of companies that dominate the market here in the US.
How These Giants Fared in 2023
AT&T saw full-year 2023 revenue of $122.4 billion, up 1.4% from 2022. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed 4.7%. And EPS of $2.41 was in line with expectations. The company had its sixth straight year of adding over 1 million fiber net new users. Postpaid phone net adds hit 1.7 million.
Verizon had full-year 2023 revenue of $134 billion, down 2.1% from the prior year. Adjusted EBITDA fell 0.2%. The company added 1.7 million broadband net new users.
There is demand in the market and both companies will continue to add wireless and broadband users.
Moving through 2024, both companies expect around 3% revenue growth in the wireless category. This is an industry trend, so the similar outlooks are expected.
But AT&T projects EBITDA growth in the 3% range versus Verizon’s 1‒3% guidance.
Both companies have net debt-to-EBITDA ratios of around 3.5 times… dividend yields over 6%... and similar payout ratios around 50%.
However, I prefer a company getting ready to exit a transformation period that positions it for more growth. And that’s what AT&T has been doing over the past few years.
In 2021, AT&T announced it would sell off its WarnerMedia assets. The company then laid out a growth strategy. We are seeing the results as AT&T continues to add customers and improve its balance sheet.
If You Feel a Strong Pull to One or the Other, Go for It
There’s something to be said for being excited about the stocks in your portfolio.
If it’s a brand you use and love, why wouldn’t you want to own it? You could see your dividend as a discount on your monthly service fee. As long as the fundamentals are reasonably solid and, in our case, the dividend is worth holding.
I don’t think the telecom industry will ever see a true leader. It will remain dominated by three or four major players. And there is enough demand for transmitting data to go around.
Both stocks are cheap right now measured by P/E and have attractive dividends. My official recommendation is AT&T. In reality, holding either one will give you the telecom exposure you must have in your portfolio in 2024 and beyond.
For more income, now and in the future,
Kelly Green
P.S. Canada also has a handful of companies dominating the telecom space. Last week, I recommended my favorite Canadian telecom company in Yield Shark. If you’re not currently a reader, you can check it out with a 90-day money-back guarantee by clicking here.
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