Portfolio Manager David Abella of City National Rochdale is favoring AT&T Inc. (T) because of its 5.7% dividend yield plus opportunity for more growth, in addition to possible capital appreciation.
“Right now we like AT&T primarily because of the yield, 5.7%. We feel that there is a potential growth in the yield in the 3% to 5% range. That’s a little higher than it’s been in the past few years, but we do feel that there is the potential for growth,” Abella said.
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From a valuation point of view, Abella feels that AT&T is a bit cheap right now at 12 times earnings. Going forward, he expects solid returns and yield opportunity.
“If you take the dividend yield, plus the growth in yield, plus some potential capital appreciation, we think that this stock can be a very base-hit type of investment, with expected returns in the high single digit to even low double digits over the next couple of years,” Abella said.
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