Telecom Services

Telecom giant combines big dividend with potential capital gains.
Telecom giant combines big dividend with potential capital gains.

Intermediate Trade: AT&T Real Money Pro($)

The trade is the near-the-money, bullishly biased vertical call spread expiring in July.
The company's earnings stalemate may threaten the stock's 9% dividend yield.
During the recent quarter, the dividend represented a payout ratio of less than 60% of available cash flow.
U.S. telcos have been turning to M&A to offset revenue pressures and protect their rich dividends. That leaves conditions ripe for further dealmaking.
DirecTV Now is priced at $35 in an attempt to appease regulators and cord-cutters alike.

Don't Own AT&T Bonds Real Money Pro($)

Bondholders don't have the upside shareholders might get if the Time Warner deal works out.
Based on expected 2017 earnings of the combined entity, the payout ratio would be 65%.
Other content creators, such as Viacom, could also be in play, and see their stocks rise.

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