The dot-com crash was like a game of musical chairs that left many tech companies without a seat. Some of those that managed to survive, such as Microsoft and Amazon, went on to dominate their respective industries, and are now among the biggest names on the market.
But there's another subset of tech companies that made it through the storm and still lead their sectors today, but that never saw their share prices regain the peaks of the dot-com bubble. For instance, Intel (INTC +3.21%) still sets the tone in the markets for PC and server processors, but its stock has yet to regain the high of $75.81 per share it set on Aug. 23, 2000.
Telecom titan AT&T (T +0.58%) has a similar story to tell, but the details are different, and everything changes when you focus on different metrics.
The story of AT&T, née SBC Communication
Around the turn of the millennium, the company we know as AT&T today was actually known as SBC Communications (even earlier: Southwestern Bell), one of the seven Baby Bells created by the Bell System's breakup in 1984. Together with BellSouth (another Baby Bell), SBC co-founded Cingular Wireless in 2000 at the height of dot-com fever. Cingular ended up doing so well in the early age of consumer cell phones that it acquired its former parent companies and reconstituted more than half of the old Bell System. The name change back to AT&T was still a few years away.
Long story short: The AT&T stock you can buy today represents a very different company than the one it was during the dot-com boom.
Image source: Getty Images.
Many ways to look at one stock
That being said, SBC Communications peaked a bit earlier than Intel. The current AT&T stock's all-time high of $45.23 was set on July 19, 1999, just before a disappointing quarterly report that raised questions about its pending merger with fellow Baby Bell Ameritech. That buyout was completed three months later.
Today, AT&T shares trade 56% below their dot-com pinnacle.
However, that's not the whole story. Share prices can be misleading.
AT&T has printed a lot of new shares since the summer of 1999, mostly to finance several Baby Bell acquisitions and its ill-fated Time Warner merger. There were 2.0 billion stubs in circulation back then and 7.1 billion today. As such, AT&T's market cap of $135 billion is 59% higher than it was 24 years ago.
And that's still not the whole story. Like many telecom companies, AT&T runs a generous dividend program with yields averaging 6.4% during the period under discussion. If an investor reinvested their dividends in more AT&T stock for all these years, their total returns would have more than doubled their original investment.
T Total Return Price data by YCharts.
If you bought SBC Communications stock for $43 per share in 1999, those stubs now come with an annual dividend payout of $1.11 per share. That works out to a 5.8% yield, comparable to AT&T's long-term average.
AT&T's stock price has never regained its apex, but its market capitalization and dividend-adjusted stock price are delivering gains today, even in the worst-case scenario where you bought SBC Communications shares at the top of the dot-com bubble.
I say potato, you say tomato
By contrast, Intel never went on a game-changing buyout spree -- it has been focusing on similar target markets for the last two decades. The Intel of the dot-com boom is quite similar to the chip giant we see today.
Thanks to an active share buyback program, the company has reduced its outstanding share count by 39% since the summer of 2000 while its dividends have averaged a more modest 2.2%. Thus, neither its basic share price nor its market cap have regained their former glories. However, Intel's dividend-adjusted total returns were positive between the summer of 2018 and the spring of 2022.
Beauty is in the eye of the beholder, and so are successful investments. There are many ways to look at a stock's performance over time, and each one can be useful for different investors or different types of analysis.
