Why Shares of AT&T Inc. Are Up 24% in 2016

As investors look toward safer investments this year, AT&T has been a popular pick.

Travis Hoium
Travis Hoium
Jul 12, 2016 at 7:42PM
Consumer Goods

Image source: Getty Images.

What: Shares of telecom giant AT&T Inc. (NYSE:T) have jumped 23.5% in 2016 according to data provided by S&P Global Market Intelligence as investors have started to put more value on safety and dividends in an uncertain macro environment.

So what: Operationally, AT&T has been firing on all cylinders. The DIRECTV acquisition is beginning to show up in financial statements, demonstrated by: the 24% revenue growth to $40.5 billion, 2.3 million wireless net adds, and 328,000 DIRECTV net adds. This all serves to show continued momentum in the core business. 

But what's driving AT&T's shares higher may have more to do with the broader market's sentiment so far this year. There's a lot of concern about global growth rates and currency fluctuations, sending investors to "safe" stocks with predictable cash flows like AT&T. Very few people are going to consider dropping their cellphone service because of a weak economy, so this is an attractive company at the moment.

Now what: Despite the rise in shares this year, I don't think AT&T is a stock that's overvalued by investors. Shares trade at just 14.1 times forward earnings estimates and the dividend yield is a lofty 4.5%. Both are attractive for long-term investors, especially when you consider how stable the business is. The wireless business is looking bright, and with AT&T's new content assets from DIRECTV it is well positioned for future growth.