BUY T @ $23.72

Buying T @ $23.72

2% position

AT&T has long been a high yielding dog of a stock. On one hand, it's a dividend aristocrat - growing the dividend for 50+ consecutive years. On the other hand, they've loaded up on debt and disappointed shareholders for a long time. They've probably destroyed a lot of value with the various transactions.

But that's yesterday's news.

AT&T is spinning their TimeWarner business with Discovery. T shareholders will receive shares of the new company and own 71% of it. T will also receive some $45 billion of cash.

Post-spin, T will reduce the dividend from current levels. They're using the spin as justification - less cash flow means less dividends. But we can see past that - it's a true cut. But that's not a bad thing, per se.

The dividend is expected to be somewhere in the $1.10-1.15 range. At this purchase price, that means a yield of 4.6-4.8%. While that's a pretty attractive yield, it ignores the value of the SpinCo! It's hard to put a finger on it, but initial estimates were in the $8-10/share range and are likely much lower today - perhaps $4-5/share of T.

That means, that the dividend yield on a post-spin AT&T will be closer to 6% - kind of where it's always been. With inflation-level annual growth, that's not a bad deal!

I need to dig further into the details of the spin and how T will use the cash - I've seen headlines of a special dividend - but this level of research suffices for an initial purchase.

In the coming weeks, I expect this position to get to max size - unless I find something worrisome in my continued research.