Hi CI,
My current position is a sell of the T March 26 puts. I have sold 20 contracts with an average of $1.37. If assigned to me a net purchase price of $24.63.
I'm anticipating a 4 cent increase on T's annual dividend for 2021. That would yield 8.44 % with no increase or 8.60%. That's doubling of my money in 8.55 years.
T's price action performance will take us to high thirties and possibly low 40's when Time Warner begins full operation movies at the show, with their streaming of content library making continual progress as streaming becomes the dominant release format.
Their debt is the big knock and they have aggressively worked that down, Their next goal is to buyback the shares issued in the acquisition - at these prices it's getting compelling to lever their great credit with inexpensive debt and get it done with a long payback structured with inexpensive debt.
The other big knock is HBO MAX, which is priced at a premium and ahead of subscription targets at admittedly lower goals than Disney.
T is a quality company and when they do something it is done right and they charge a premium for their services - like seen with Direct TV - their subscribers are cutting the cord, but their current subscribers are paying the price increases and the ARPU is up more than subscription are down. per EBITDA.
They are not a growth machine, but they have excellent credit ratings and have aggressively used it to secure 2% ten year money and 3.25% 30 year.
They need to continue their debt reduction and buy back their stock below $28.00, it saves them 7.4% by not paying the dividend and using their solid credit ratings.
Like a big corporation they move slowly, and have many assets under their portfolio. Debt reduction this lasy quarter was 2.9 billion - that is hard to relate to in my world - but they have been doing that steadily since the acquisition - which was greatly delayed by the antitrust work of the DOJ.
They have many potential deals with Direct TV, comic videos,and who knew the Time warner deal include a european phone system which just got sold for 1.1 billion and a reduction of backstopped debt of 575 million?
T's real estate holdings must be massive as every down town I drive through, you can see a big tall downtown building with their logo on it.
They are conservative and working their assets to achieve top dollar for some very nice assets.
A solid blue chipper with some management that sits on top of some nice assets and they probably have an entitled attitude that works fairly well in this slow growth environment where real estate is doing quite well.
Hope that helps - I think the negative view has been way overdone.
If nothing else the dividend mutual funds are providing some support down in this cheap price range.
I balance my portfolio with high growth no debt companies and high yield dividend companies that comprise the Dividend Aristocrats.
The long term stability of their assets (utility like) allows for debt and that allows for some analysts to get an opinion on the negative side.
When I was in college, a classmate's father was retired from T. He had a beautiful home in Shaker Heights Ohio. His retirement was very safe and he had an presence of calm security. I've admired that ever since.
I'm not worried that T will have a declining business in their core business (wireless). This quarter they added more subscribers than Verizon, and had a record low churn on their existing accounts (they have had that for years and it just keeps getting lower).
As cable cutting continues its slow bleed, my bet is that streaming is a natural replacement and well within their wheelhouse of expertise.
I also think it works very nicely with their digital advertising arm XANDR. I'd love to see this kept and give GOOG some competition - a nice solution to the antitrust abuses Goog seems to engineer?
CNBC today said that Time Warner had begun production of shows and movies, so recovery from the pandemic is coming sooner than later.
My bet is they pay a bigger dividend for much longer - at least within my lifespan's expectations.
I also have purchased some of their 5% preferred - TpA, which currently have had a nice price increase (trading at $26.3699 with a par of $25.00). This is my favorite place to park cash and benefit from the dividend's lower tax rates. (short of the March Covid collapse, the preferreds issued have been rock solid in pricing above par). This just another example of T's smart financing of there debt. They pay a lower rate, but appeal to those who have cash getting next to nothing and is taxed at a max of 20% (depending on AGI).
The depth of their management works every money saving alternative IMO.
Bob |
