Revenue was up a modest 1.3% over the year-ago quarter. Excluding charges from Cingular Wireless' merger, and amortization costs, and SBC ending agreements with WilTel Communications, earnings per share were up a nickel to $0.43. Operating margins, excluding charges, improved by 0.3% to 17%.
Cingular's results were a bright spot -- the company is 60% owned by SBC and 40% owned by BellSouth
Other positive numbers from SBC included an increase in data revenue and increased connections for DSL, long distance, and consumer retail customers.
The company's acquisition of AT&T
When Motley Fool co-founder David Gardner selected SBC for Stock Advisor in April 2004, he was not looking for a rapid grower. What he saw was a company making the transition from a wireline business whose stock price was half of what it was five years before -- with very interesting investments in its future.
SBC owns 60% of the largest U.S. wireless carrier, is No. 1 in DSL connections, and has a $500 million partnership with satellite TV provider EchoStar
David's timing was great; the company was starting its string of revenue gains. What's not so great is the 1.3% drop in the stock price since the recommendation.
Conservative investors, especially those looking for dividends to make up a healthy part of their total return, should look carefully at SBC. Analysts expect the company to compound earnings at 6% a year for the next five years. That's well short of the 10.6% compounding they expect from the Standard & Poor's 500. But add in that 5.4% dividend, and the potential total return is very tempting.
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