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AT&T Breakup Value Updated
In January ’06 Tickersense offered an analysis of what 500 shares of AT&T (T”) purchased before the 1983 breakup would be worth today.
The author of The Stalwart pointed out the analysis failed to account for dividends paid over the last 20+ years. Considering these companies were heavy dividend payers it diluted the analysis significantly. Regardless, they also included a nice little chart that illustrated the taxonomy of mergers and divestitures. I include it again, though it already needs a little updating and I’m sure it will need more in the future.
When I blogged this, I thought the chart needed a little more finesse.
The Bellsouth (BLS) and AT&T merger generated a flurry of press activity and with it, some excellent data for stat junkies like myself. Lucky for us, the WSJ published an article on Bellsouth that included the same financial analysis done by Birinyi but included the dividend yield. Birinyi reported that the S&P500 outpaced the AT&T Baby bells by almost 2x during the previous 23 years. Including dividend yields almost brings it back to parity. Chalk one up for the value of dividends.
and the moral of the story is … when an industry that struggles to grow at GDP trades at a big premium to the market … run, don’t walk. Of course in hindsight it’s easy to say that we should have sold telecom stocks in 2000, but the reality is that they never had the “upside” of the technology names.
If you believe that this business will continue to grow at GDP rates, shouldn’t you be buying them today? These companies are now the Dogs of the Dow.