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Though hardly what you would call an investment to strike it rich, AT&T (NYSE: T) still provides investors with something to think about, primarily its generous dividend yield that currently stands at 6.71%. Indeed, the telecommunications giant is one of the few dividend aristocrats or companies that have raised their dividends for at least 25 consecutive years.
Over the years, business decisions that went sour imposed a dark cloud on T stock, leaving investors unsure how to approach shares. Nevertheless, the 5G rollout and the rise of streaming entertainment could see AT&T regain its former glory.
How to Buy AT&T (T) Stock
Leveraging a market capitalization of $220.6 billion, AT&T is a stalwart in the telecom space. For the longest time, it rivaled Verizon Communications (NYSE: VZ), with the two butting heads for subscribers. But with the merger between T-Mobile (NASDAQ: TMUS) and Sprint, a viable 3-way race is now a reality in the wireless market.
What makes T stock stand out from the crowd is its streaming content. With the COVID-19 pandemic changing how consumers view content, AT&T may be able to harness its digital library to a potential new normal where the small screen outfoxes the big.
Even if you’re just learning how to buy stocks, AT&T has a little something for everyone.
Step 1: Pick a brokerage.
Before you can pick up shares of T stock and start collecting that sweet dividend, you must first choose a brokerage. Thanks to the many innovations and conveniences of modern investment technologies — in particular, mobile trading apps — competition between brokers tightened considerably.
Today, most of the incentives that draw people into their platforms are identical, such as commission-free trading. Therefore, your decision mostly focuses on lifestyle and investing growth ambitions.
For example, if you work a hectic schedule and have limited time to monitor the ebb and flow of your investments, you should research the many trading apps at your disposal. Conversely, if you want to dive deeper into advanced trading tactics, you should consider a full-spectrum service.
Below is a list of best brokers for your consideration.
- Best ForMomentum traders
- Best ForTrading Ideas
- Best ForActive and Global Traders
- Best ForActive Traders
- Best ForIntermediate Traders and Investors
Step 2: Decide how many shares you want.
While seemingly a simple step, deciding your share count is an important one to make. Mainly, this will boil down to risk tolerance, investment goal and size of your account. For younger investors with time on their hands, you can afford to dial up your risk exposure. On the other end, those closer to retirement may not want to play too many games with speculative ventures.
With T stock yielding nearly 7%, it attracts passive income seekers. But the size and relevance of the company make it a reasonable choice as a safety net for any investor.
No matter what your magic number, be sure to have it written down before you make the transaction. At the point of the deal, you don’t want immediate market emotions to distract you from your carefully planned strategy.
Step 3: Choose your order type.
Because of the constant fluctuations in the market, you need to choose an order type that accounts for this variance in the manner that you want. Below is a brief rundown of key concepts to understand.
- Bid: The bid is the highest price a buyer will offer for a stock. It is always lower than the ask.
- Ask: In contrast, the ask is the lowest price that a seller will accept. It is always higher than the bid.
- Spread: The spread is the difference between the bid and ask price. Primarily, the bid-ask spread represents profitability for the market maker, who takes risks acquiring shares for the eventual distribution to investors. The spread also indicates liquidity. Blue-chip stocks like AT&T are very liquid and therefore have a narrow bid-ask spread (low risk). On the other hand, penny stocks are illiquid and have wide spreads (high risk).
- Limit order: To place an order at an exact price, choose a limit order, which will only execute at your predetermined rate. But keep in mind that no guarantee exists that your target stock will reach said price, which could leave your limit order hanging unfulfilled.
- Market order: You might want to have a guarantee that your order placed during normal session hours will execute. In this case, choose a market order, which will fulfill at the next available price. Be aware that this means the fulfillment terms will be least favorable to you — buy orders on the ask, sells on the bid.
- Stop-loss order: A protective order that automatically cuts your losses, a stop-loss order executes when your target stock drops to either a predetermined price or the next available price. The biggest risk with stop losses is the gap-down session, where a new session opens at a much lower price than the previous day’s close.
- Stop-limit order: To prevent the possibly steeper-than-expected loss associated with stop-loss orders, you may elect a stop-limit order. This order type only executes at a predetermined price. However, if after a gap-down session your target stock never reaches that price, you could leave your stop limit hanging painfully unfulfilled.
Step 4: Execute your trade.
To execute your trade, follow these steps for a market order:
- Select action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the buy (or sell) button.
To place a limit order, follow the same steps above, with the exception that you must enter your desired execution price.
AT&T Stock History
Since the 1980s, AT&T helped guide shareholders through rough waters, including the Black Monday crash of 1987, the recession in the early 1990s and the technology boom-bust cycle. While T stock didn’t escape every negative incident unscathed, shares quickly rebounded, all while providing stakeholders reassuring dividend payouts.
During the COVID-19 pandemic, T stock has held up well. But the reality is that many stocks skyrocketed during this time, making the telecom appear dull in comparison. Further, one glance at its chart and it’s patently obvious that AT&T is a mature company.
Still, boring has its virtue, especially when you face the unknown. With jobless claims for the week ended April 3, 2021, jumping above analysts’ expectations, it might not be a bad idea to have some exposure to a resilient business like AT&T.
T Restrictions for Retail Investors
No specific restrictions exist for retail investors who do not have access to AT&T’s privileged information. However, executives or employees of AT&T may fall under blackout period restrictions, such as when the company is about to release its earnings report.
Pros and Cons of T
As a behemoth in its category, AT&T provides stability for investors:
- Passive income: AT&T has a decades long history of not only paying its shareholders a dividend but increasing the payout. Though pressure exists to reduce or suspend it to free up capital, there’s also an incentive to keep it to attract investors.
- Certainty during uncertain times: While no industry is recession-proof, telecom comes close. That’s because you can’t survive in this digitalized world without access to connectivity services. Therefore, T stock provides a measure of economic insurance.
- Compelling content: AT&T absorbed heavy criticism for making pricey deals such as its Time Warner acquisition. But the flipside is that this gives AT&T control of HBO and Warner Bros., which each offer compelling content and popular entertainment brands.
On the other end of the scale, the telecom firm has its drawbacks:
- Opportunity cost: AT&T is a mature company in a mature industry, which means the chances of T stock soaring to the moon is minimal. Therefore, those seeking strong capital gains risk an opportunity cost if they pass up growth firms that later make good on their potential.
- Debt, debt, debt: Earlier in 2021, AT&T sold a minority stake in DIRECTV to a private equity firm. It’s a necessary step to reduce the company’s debt load but it remains massive.
An Old Dog with Some New Tricks
As a dividend aristocrat, investors have long depended on AT&T to provide robust, reliable passive income and it has delivered. While it doesn’t have the pizzazz of growth stocks, the telecom firm’s slow-and-steady approach appeals to many investors who fear an unsustainable situation brewing in the global markets.
At the same time, AT&T has the potential to tap into relevant sectors, primarily content streaming. Thanks to its Time Warner acquisition, the company leverages an enviable entertainment brand empire.
The biggest question is whether AT&T’s new tricks are enough to overcome its flaws, mainly its debt load. The broader transition to streaming and connected services may tip the narrative in favor of T stock.
Frequently Asked Questions
Will AT&T cut its dividend?
That’s always a possibility and the rumor mill got into full swing when AT&T didn’t raise its dividend at the end of 2020. Nevertheless, getting rid of the dividend altogether will likely cause many to abandon T stock, which is something management desperately wants to avoid.
Is HBO and other content brands enough to save T stock?
One business unit alone won’t save an entire organization like AT&T. However, consumers enjoy high-profile entertainment brands like DC Comics, which is under the AT&T corporate umbrella. Also, the telecom giant offers critical wireless and connectivity services.
Disclosure: The author held a position in T stock at time of writing.