AT&T Corporate Restructuring – GuruFocus.com
AT&T Inc. (T, financial) is a great investment option right now. The stock is expected to see a rise on both systemic and idiosyncratic tailwinds. From a market perspective, the company should perform well as it is a value stock, which typically fights inflation. The company is also in the process of restructuring, which leads investors to anticipate substantial gains.
AT&T has entered into an agreement with Discovery Inc. (DISCA, Financial) to sell its media assets. The objective of the agreement is to create an autonomous brand, which will experience greater synergies with the involvement of Discovery.
The company will keep 71% of the business and receive $ 43 billion in cash and debt, which will help it pay off much of its debt. The capital will add the necessary liquidity to its balance sheet as it embarks on a 5G campaign with a significant opportunity cost.
AT&T followed Verizon’s strategy by divesting and offloading a significant amount of its non-core assets. The company signed a deal earlier this year to sell its video streaming business for $ 7.6 billion. As liquidity is added to the balance sheet through divestitures of non-core businesses, analysts will begin to reverse the conglomerate’s handover, which could add significant value to the stock.
A dividend yield with constant growth is generally an indicator of value and not just higher future dividend income.
A 7.43% return is sublime and indicates that AT&T holds significant value.
From a relative perspective, investors need to understand that we are in a market with higher multiples. But even considering the higher market multiple, we can conclude that AT&T is undervalued relative to the index because its price-to-sell, price-earnings, price-to-cash-flow, and price-to-pound ratios are all trading. below the reference values.
AT&T is already a great investment because it is a high quality company with a high dividend yield and good measures of relative value. The restructuring of its activities will add liquidity to the balance sheet and develop its core business, thereby increasing its market share and intrinsic value.