AT&T is currently presenting a dividend yield of 6.84%, a sign of a shifting landscape in the wireless carrier industry, which for years was characterized by aggressive price competition. The company is seeing a significant improvement in its financial health, with a notable increase in free cash flow by one-quarter and potential for further financial gains through expense reductions. Despite a substantial net debt of $129 billion, AT&T's shares are considered undervalued, trading at less than seven times forward earnings.
On the other hand, Altria Group (NYSE:MO), known for its tobacco products, is offering a higher dividend yield of 9.45%. The company faces challenges as it deals with a decline in the popularity of traditional cigarettes, which was reflected in a revenue decrease of over four percent year-over-year in the third quarter of this year. Altria is exploring new markets, including e-cigarettes, cannabis products, and oral nicotine, but these have not yet offset the losses in its traditional business. Despite these challenges, Altria maintains a commitment to shareholder returns, having a history of raising dividend payouts 58 times previously. Its stock is trading at eight times forward earnings with a payout ratio of three-quarters.
The comparison between the two companies suggests that AT&T may be the more attractive option for investors seeking ultra-high-yield dividend stocks. This is due to its improving fundamentals and a wireless carrier industry that is moving towards a more stable competitive environment. Altria, while still committed to dividends, faces substantial headwinds from changing consumer habits and regulatory pressures.
InvestingPro Insights
For those considering an investment in AT&T or Altria Group, real-time data and InvestingPro Tips offer additional context. AT&T, with a market capitalization of $115.4 billion, shows signs of financial improvement. The company's gross profit margin in the last twelve months as of Q3 2023 stood at a solid 59.11%, and despite a slight revenue growth of 1.04%, the valuation implies a strong free cash flow yield, aligning with the article's mention of increased free cash flow. The dividend yield is attractive at 6.85%, and InvestingPro Tips suggests that net income is expected to grow this year, which could be a positive sign for investors. There are 9 additional InvestingPro Tips available for AT&T, which can be explored with a subscription now offered at a special Cyber Monday sale discount of up to 55%.
Altria Group, with a market capitalization of $73.13 billion, is trading at a low earnings multiple of 8.44 and has a high gross profit margin of 69.44% for the same period. Despite a revenue decline, the company has raised its dividend for 13 consecutive years, showcasing a strong commitment to shareholder returns. The current dividend yield is high at 9.45%, and InvestingPro Tips highlights that Altria is profitable over the last twelve months, which could reassure investors about the company's ability to maintain its dividends. For more in-depth analysis, there are 15 additional InvestingPro Tips available for Altria Group, accessible through the InvestingPro subscription at a significant Cyber Monday discount.
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