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Move clears the way for DirecTV to pursue a merger with rival pay-TV company Dish
AT&T said on Monday it would sell its 70% stake in satellite TV service DirecTV to private equity firm TPG for $7.6 billion, exiting a business marked by declining distributions for the telecom operator.
DALLAS , Sept. 30, 2024 /PRNewswire/ -- AT&T (NYSE:T) ("the Company") reached an agreement to sell its remaining stake in DIRECTV to TPG.
Shares of Dish Network parent EchoStar surged on heavy trading volume Friday on reports of a merger agreement could soon be reached between Dish and satellite TV rival DirecTV. With an hour left in the trading day, the stock was up 9% at $28.08.
The Wall Street Journal reported DirecTV could acquire rival Dish, creating one of the nation's largest pay-TV providers, in a deal that could be announced as soon as Monday.
With the Federal Reserve kickstarting a new rate-cutting cycle, dividend stocks have become even more attractive. On Wednesday, the Fed made a hefty 50 basis points cut, surprising many who had anticipated a more modest 25 basis point reduction.
AT&T shares rebounded impressively, generating 28.68% YTD returns, outperforming the S&P 500's 11.2% gains, prompting an upgrade to a "buy" rating. Strong Q2 results with 419,000 new wireless subscribers and a 0.7% churn rate, alongside a 9% increase in free cash flow, support this upgrade. Despite an 8% decline in mobility equipment revenue, AT&T's valuation remains attractive, trading at 9.14x 2026 earnings and 7.4x free cash flow.
AT&T's fundamentals have improved since refocusing on telecommunications. Lower interest rates make AT&T's 5.1% dividend yield more attractive.
The Investment Committee discuss the latest Calls of the Day.
AT&T's Fiber Broadband growth and increased free cash flow make it a compelling option for passive income investors, with a low dividend payout ratio. The Telco's reaffirmed 2024 free cash flow forecast and low valuation based on profits bolster the investment thesis despite recent 52-week highs. AT&T's stock remains moderately valued at 9.5x leading profits, with an intrinsic value estimate of $23-$25, driven by robust FCF growth.