AT&T Inc. (T) and Verizon Communications Inc. (VZ): Two Solid Stocks

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Rewarding shareholders

I like these companies because they have a long history of rewarding shareholders through dividends, share price increases, and spin-offs.  Over the course of history, owning shares of the original Ma Bell has provided investors the opportunity to receive shares of many new companies.  These spin-offs have proven to produce great returns for long-term shareholders.  This fact presents a strong case for holding stocks like these for the long-term.  I compare the original Ma Bell to the original Altria Group Inc (NYSE:MO), as both companies have spun off many others over the last 20-30 years.

Because of the fact that dividends are growing for both Verizon Communications Inc. (NYSE:VZ) and AT&T, this provides further reason to hold the shares.  At current dividend yields, without considering compounding interest or share price increases from dividend increases, in 20 years (based on a 5% yield) a shareholder will recover all of his purchase price and still own the shares.

The value of Altria’s spin-offs

To illustrate the value that spin-offs have created for all three of these companies, let’s take a look at Altria’s spin-off, Philip Morris International Inc. (NYSE:PM).

Philip Morris International was effectively spun off from Altria on March 31, 2008 at an effective price to shareholders (at that time) of $51.06 per share of Philip Morris. Since that time, shares have gone up considerably, as they trade today at around $92 per share. In addition, the company also pays a decent dividend, which has a current yield of about 3.7%.

Kraft was spun off from Altria in April 2007. The effective price of that spin off was around $21.90 per share. Since that time, Kraft rose considerably and has recently split into two companies. Shareholders of Kraft received shares of Mondelez International Inc (NASDAQ:MDLZ) and Kraft Foods Group Inc (NASDAQ:KRFT). Shareholders of Kraft, when it was split into two companies, received one share of Mondelez for every share owned of Kraft, and one share of Kraft Foods for every three shares owned of the original Kraft.  At current price levels, the value of this creation is $30 (Mondelez’s share price) plus $18 (one-third of Kraft Foods’ $54 share price), or $48. Add that to the dividends and you have a great return.

To sum it all up

I believe these companies are here to stay, and I view these as top choices for any portfolio. I would recommend investors consider dialing up Verizon and AT&T Inc. (NYSE:T) for their portfolios, as over time, they have proven to be more than capable of answering the call of investors seeking long-term value and returns. I also believe that Altria is a great stock for the long run.

The article AT&T and Verizon: 2 Solid Stocks originally appeared on Fool.com and is written by Anthony Parsons.

Anthony Parsons owns shares of Verizon Communications, Altria Group, Vodafone Group, and AT&T. The Motley Fool has no position in any of the stocks mentioned. Anthony is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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