Today AT&T dropped some 5% after trading down for almost 6% during the trading session. It then recovered slightly. My position and thinking about this stock is quite mixed. Is it a buy, or is it a sign of a trouble?

The company reported in my opinion good results. It reported, in their words, strong earnings per share and solid cash flow. In wireless network the company shined and grew data revenues by 21%, service revenue up 3.4% and total wireless revenue up 3.4%. The customer base, mainly the postpaid base grew significantly as well (by 72%). U-verse subscribers increased by 31%, etc,. However, it seems the numbers didn’t impress the market and investors heavily dropped the stock. Could slowing of revenue growth or Operating Income Margin (which was down as well) impact today’s trading? Maybe.

Was this price drop yet another overreaction? Is this price drop an opportunity to add more shares?

As a dividend growth investor I am interested in the dividend, how secure and sustainable the dividend is. I do not care much of the price action. I am only interested in price action of a stock, if it is providing a good opportunity to buy more shares.

However, such price action can be a result of a problem with dividends. This is the only task a dividend growth investor needs to find out. Is the dividend in jeopardy so investors are dumping the stock? Or is something else behind the drop? If something else, for example the company missed a revenue expectation, then I do not care about that. From the long term perspective, one missed quarter doesn’t make me worrying at all, mainly with a good solid dividend paying stock with a great dividend history, which AT&T definitely is.

What makes dividends available? Cash flow! So is AT&T the cash cow? If you had a chance to listen to the conference call and see the data, it seems AT&T is the cash cow you are looking for.

But, on the Internet I found one item which bothered me. A rumor goes that the company offered to sell some assets to fund the dividends. That is a big RED FLAG, which would cause me either to hold the stock, or even sell it.

Is this an issue with AT&T? Well, I listened to a conference call carefully, mainly the questions at the end of the conference and nothing has been mentioned or even asked by participants. Although there are still risks (as with any company), the information I could find is, at this point, a rumor to me and I found no evidence that the company made such an offer.

Today’s situation around AT&T is just an overreaction to me and an opportunity to add more shares to my current holdings. I decided to take advantage of today’s price and entered a conditional limit order to buy AT&T shares.

Trade detail

I entered the following trade:

When this condition occurs:

The last price of (T) is greater or equal to $37.36

Trigger an order:

Buy to open 26 shares of T Limit at $37.36
GTC (Good Till Canceled)

If the price continues sliding tomorrow, I will be moving my entry point lower with the price. If however the stock reverses tomorrow and grows up or above the trigger price of $37.36, the order becomes live and should execute. If any of that happens, I will post it.
Photo courtesy Aurich Lawson / Embassy Pictures