For decades, AT&T used to be one of the highly sought-after stocks on the S&P 500because of its cash-flow-powered high yields. AT&T, at its best, had generated $13.6 billion in cash flow and gave its investors 6.1% returns in the form of dividends alone. However, the company has been facing serious competition in recent times with certain companies doing even better than AT&T.
Stock options with higher dividends and cash-flow
There are 10 companies listed on S&P 500 that has generated more than $5 billion in cash flow. Pioneer Natural Resources, Altria and Verizon Communications are most notable among these companies.
Pioneer Natural Resources is a Texas based oil & gas exploration company that has generated a $7.4 billion cash flow in the last 12 months. Altria is a tobacco seller. The company attracted a whopping $8 billion in cash flow last year. The company offers an 8% dividend to its investors.
AT&T’s direct competitor Verizon has been performing better than AT&T. It offers 7% yields and its cash flow outshone AT&T’s by 4%.
Why do stock options with higher dividends matter?
Companies that offer high dividends attract investors with long-term commitments. Dividends ensure that investors have an income from their investments. High-dividend stock options are always a ‘hot’ commodity, their demand goes higher when the economy slows down and investors are not able to get quick returns on their investments.
Speculation on stock options mentioned above
Experts believe that both Altria and Pioneer might not be able to sustain their growth in the long run. The product sold by Altria is controversial and tobacco companies are always a litigation risk. The same is almost true for Pioneer along with the risk of exposure to volatile macroeconomic conditions. Verizon remains the investors’ favorite for the long run. The company operates in the same sectors as AT&T and has a much more appealing product portfolio compared to the other companies.
