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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week


April 1st 2011 AT&T
NYSE Symbol: T
Industry: Telecom
Price as of 4/1: $30.62

The major averages roared back to end the month of March and the first quarter with the Dow once again approaching its' 52 week high. So much for that correction. The commodity sector remains the leader with silver, gold, copper, steel, and fertilizers all performing well. That's a good sign for the world economy. The financials remain stuck in a rut, but other sectors are perking up including telecom. This week we'll feature a blue chip telecom giant in the Dow that sports a great dividend yield. The stock of the week is AT&T. Last week AT&T surprised Wall Street by offering to buy T-Mobile for $39 billion. Investors cheered the news by bidding up the stock to a new 52 week high. However, even with the recent improvement in the stock, AT&T still sports a dividend yield of 5.6% and goes ex-dividend on April 6th.

AT&T's earnings and fundamentals will change dramatically once they merge with Deutsche Telecom, however, last quarter the Dallas based telecom firm reported a profit of $1.09 billion or 18 cents a share, down from $2.73 billion, or 46 cents a share a year earlier. Excluding items such as an accounting charges and severance costs, earnings rose from 50 to 55 cents beating estimates by a penny. Revenue rose 2% to 31.4 billion just shy of estimates. AT&T's mobile unit, the primary engine of its growth in recent years, reported a 9.9 percent increase in revenues to $15.18 billion. Average revenue per postpaid contract user rose by 2.2% to $62.88 and churn, a measure of customer loyalty, was steady at 1.15%. AT&T said that its mobile unit added 400,000 postpaid contract customers in the fourth quarter, down significantly from 841,000 in the same period a year ago. However they gained 442,000 subscribers to tablet computers, including the Apple iPad and the Android-powered Samsung Galaxy Tab. They also signed up 4.1million Apple iphone customers in its last quarter as the exclusive carrier of the device. The big concern going forward, however, is the fact Verizon Wireless will begin to offer the iphone although, as we know now, a majority of the subscribers stayed with AT&T. The AT&T platform has one main advantage over Verizon phones due to the fact you can surf the Internet while remaining on a call. The Verizon service does not have that feature.

Since last weeks' announcement that AT&T would acquire Deutsche Telecom, the stock has perked up, but still remains attractive. Currently, AT&T trades for 12 times next years' earnings, 1.4 times sales, and just 1.6 times book value. But the best attribute of the stock is the dividend which is $1.72 or a 5.6% yield and the stock goes ex-dividend on April 6th. With the market shooting straight up, it's not a bad time to shift some money into income ideas.