Stock Analysis on Net
Stock Analysis on Net

AT&T Inc. (NYSE:T)

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Dividend Discount Model (DDM)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

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Intrinsic Stock Value (Valuation Summary)

AT&T Inc., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at
0 DPS01
1 DPS1 = × (1 + )
2 DPS2 = × (1 + )
3 DPS3 = × (1 + )
4 DPS4 = × (1 + )
5 DPS5 = × (1 + )
5 Terminal value (TV5) = × (1 + ) ÷ ( – )
Intrinsic value of AT&T Inc. common stock (per share)
Current share price

Based on: 10-K (reporting date: 2023-12-31).

1 DPS0 = Sum of the last year dividends per share of AT&T Inc. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk of AT&T Inc. common stock βT
 
Required rate of return on AT&T Inc. common stock3 rT

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rT = RF + βT [E(RM) – RF]
= + [ – ]
=

Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

AT&T Inc., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Common stock dividends
Preferred stock dividends
Net income (loss) attributable to AT&T
Operating revenues
Total assets
Stockholders’ equity attributable to AT&T
Financial Ratios
Retention rate1
Profit margin2
Asset turnover3
Financial leverage4
Averages
Retention rate
Profit margin
Asset turnover
Financial leverage
 
Dividend growth rate (g)5

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Retention rate = (Net income (loss) attributable to AT&T – Common stock dividends – Preferred stock dividends) ÷ (Net income (loss) attributable to AT&T – Preferred stock dividends)
= ( – – ) ÷ ( – )
=

2 Profit margin = 100 × (Net income (loss) attributable to AT&T – Preferred stock dividends) ÷ Operating revenues
= 100 × ( – ) ÷
=

3 Asset turnover = Operating revenues ÷ Total assets
= ÷
=

4 Financial leverage = Total assets ÷ Stockholders’ equity attributable to AT&T
= ÷
=

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × ×
=

Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × r – D0) ÷ (P0 + D0)
= 100 × ( × – ) ÷ ( + )
=

where:
P0 = current price of share of AT&T Inc. common stock
D0 = the last year dividends per share of AT&T Inc. common stock
r = required rate of return on AT&T Inc. common stock

Dividend growth rate (g) forecast

AT&T Inc., H-model

Microsoft Excel
Year Value gt
1 g1
2 g2
3 g3
4 g4
5 and thereafter g5

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= + ( – ) × (2 – 1) ÷ (5 – 1)
=

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= + ( – ) × (3 – 1) ÷ (5 – 1)
=

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= + ( – ) × (4 – 1) ÷ (5 – 1)
=