Over the past five years, AT&T only managed to grow earnings at 1% per year. You got to collect a 5% or 6% dividend along the way, which was a nice offset, but ultimately core business was not keeping up with inflation. This was due to three things: (1) the company was losing lucrative landline customers at a fast rate; (2) Verizon Wireless was making market share gains in the mobile space; and (3) the company was investing heavily into Mexican infrastructure that had a payoff several years down the line. This slow growth explains why the quarterly dividend has only grown by a penny per share during each year since 2007.
This acquisition of DirecTV is going to add $3 billion in annual profits immediately, and estimated cost savings of $1.5 billion per year for the next four years could make AT&T a company making $20 billion per year … Read the rest of this article!