AT&T Not A Dividend Portfolio Contender

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Feb 04, 2015

AT&T (T, Financial) has created a name for itself in the market for being one of the best performing stocks and for paying out high rates of dividend to its shareholders. However, if you thought that AT&T is the best in terms of dividend yield, you will be proved wrong by the following three stocks. These three stocks have not only reported excellent dividend growth over the years, but also have good growth prospects, which is a double whammy for investors.

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Dividend growth expert

For a company to be considered as a good dividend stock, it should not only have an impressive yield, but should also have phenomenal growth. This is where Procter and Gamble (PG, Financial), the consumer goods giant, scores heavily over AT&T. AT&T, undoubtedly has an excellent dividend yield of 5%; however its dividends had grown only by 11.9% in the last five years. Procter and Gamble, on the other hand, had reported a whopping 33% growth of dividends in the same period, making it a better bet than AT&T.

Procter and Gamble has been paying out dividends for the last 124 years without any interruption, which is an achievement in itself. For 58 years at a stretch, the company has been announcing increase in dividends. Very few companies can boast of such figures. For 2014 alone, the company’s dividend yield stood at an impressive 7% and the dividend per share was $2.45. Close to $6.9 billion worth of money was paid out to shareholders by Procter and Gamble for 2014. Currently the dividend per share has gone up to $2.57 per share and it is all set to be one of the biggest dividend yield stocks of 2015.

Small is big

A small telecom company named Frontier Communications (FTR, Financial) has emerged the surprising winner in the race of dividend yields, pushing back a giant in the same sector, AT&T by a huge margin. Frontier reported a 5% growth of dividends for last year, whereas AT&T reported only a 2% increase during this time. Also, Frontier’s dividend yield of 5.8% yield is slightly better than AT&T’s yield of 5.5%. During the last year, Frontier was involved in many business strategies in order to improve its presence in the big and small cities. Acquisition of cheap telecom regional companies helped Frontier to penetrate into different areas. In just the first three quarters of 2014, Frontier had added a whopping 189,000 broadband customers to its base, thereby cementing its place strongly in the telecom industry. One of the points that make Frontier Communications a good dividend stock, is its huge amount of free cash flow in hand. Currently trading at just about $7per share, Frontier is highly recommended by analysts for shareholders who want to buy cheap stocks that pay rich dividends.

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Toys rule over Telecom

Toys maker Hasbro (HAS, Financial) is yet another dividend stock that has fared very well when compared to AT&T’s stock. While comparing the dividends of these two companies for the last 8 years, Hasbro is the clear winner as it had increased its dividends by 17% during this time, as against AT&T’s dividend increase of a mere 3.6%. Hasbro has yielded a return on investments of 138% so far and this is an impressive figure when compared to AT&T’s returns of 52.84%. At this rate of growth, it is almost impossible for AT&T to outperform Hasbro anytime in the future.

Conclusion

Dividend stocks are constantly undergoing various transformations in their sector. A stock that classifies as a great dividend stock for one year can be toppled by a relatively unknown stock next year. It is the duty of the investors to carefully change their portfolios accordingly in order to reap large benefits.