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

By Travis Hoium – Jul 12, 2016 at 7:42PM

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

Image source: Getty Images.

What: Shares of telecom giant AT&T Inc. (T 0.16%) 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.

Travis Hoium owns shares of AT and T. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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