I in the end went on of AT&T (NYSE: T) Last month. I’d owned the popular wireless operator since 2018, but AT&T, which was superseded by WarnerMedia while also warning that it would drastically reduce its dividend, was a double punch I couldn’t ignore.
When AT&T is no longer a media empire or a Dividend aristocrat Is it really still worth owning? It may get attractive in time, but right now Verizon Communications, (NYSE: VZ), aim (NYSE: TGT), and Tangier Factory Outlet Center (NYSE: SKT) are better dividend stocks. Let’s kick those tires.
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1. Verizon: 4.5% return
Verizon’s 4.5% trailing return may pale compared to the 7.2% AT&T paid out last year, but that is about to change. AT&T will cut the payout after closing the WarnerMedia deal by almost half. We probably have Verizon by now Quarterly dividend increase in two months as it has been for 14 years.
Verizon is not perfect. It sees increasing sales growth only 2% in 2021. It also needs to make some big investments to benefit from the 5G revolution. However, there is an opportunity to gain market share in AT&T if the rival loses focus during the transition. Verizon also trades for only 11 times this year’s earnings, and it should be noted that it has exceeded Wall Street’s profit targets on all four past reports.
2. Goal: 1.5% return
The goal is next on the list. The “cheap chic” retailer offers the lowest return on this list but is the only active dividend aristocrat. Target has increased its quarterly payouts for 49 consecutive years.
One of the main reasons the returns are so low is that the stock has appreciated significantly because it is doing so well. The goal has more than doubled in the last year. The mass market trader thrived in the pandemic. Target didn’t have to close in the early stages of the COVID-19 crisis and provided the basics to get people through the lockdown.
Have comps exceeded 20% for four consecutive quarters, and the 22.9% increase in the last fiscal quarter is stacked on an increase of 10.8% last year. Digital sales are booming, but more of Target’s capabilities here are its ability to increase store traffic and roadside pick-up volumes.
3. Tanger Factory Outlet Center: 3.8% return
We are again shopping in brick-and-mortar stores, but still want to get more for our money. The same thesis that drives retail traffic to Target also applies to Tanger, an operator of three dozen open-air shopping centers full of discounters for top brands.
Traffic was 97% of the 2019 level in its last quarter – Two-year comparisons are much more remarkable these days – and they hit 100% at the start of the current quarter. Occupancy is still not where it used to be, but that will change when the tenant mix is updated after the pandemic. That’s a return that could increase later this year as Tangier pays half what it was before the COVID-19 crisis. As a real estate fund (REIT) Tanger Factory Outlet Centers will pass its rising profits on to shareholders.
Verizon, Target, and Tanger Factory Outlet Center should all increase their payouts in the coming months. AT&T goes the other way.
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Rick Munarriz owns stakes in Tanger Factory Outlet Centers and Target. The Motley Fool recommends Tanger Factory Outlet Center and Verizon Communications. The Motley Fool has one Confidentiality Policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.