Charter Communications, Inc. (CHTR), DIRECTV (DTV): Investing in Content Delivery: Part 1

Last quarter, AT&T Inc. (NYSE:T) saw revenue climb 2.6% while earnings increased over 7.6% year over year. AT&T’s management is also committed to its shareholders. This telecom bellwether returned $4 billion of it’s $9.5 billion in cash from operating activities to both repurchase shares and pay a juicy dividend. This goes to show that blue-chip behemoths can still grow at a substantial rate.

AT&T Inc. (NYSE:T)’s repurchase program also ended up saving the telecom giant a substantial amount of money. Ma Bell was able to borrow money at 2% to repurchase shares yielding 5.5%. This means that AT&T will pay a little more in interest expense, and save a lot more in dividend payouts. Each quarter the company will save over $150 million on the repurchased shares.

Foolish bottom line

Local cable companies may not be the safe investment they were before. They are facing pressure from satellite distribution companies that have very low variable costs, and the telecom giants that have very deep pockets. DIRECTV (NASDAQ:DTV) is twice as big as Charter Communications, Inc. (NASDAQ:CHTR); however, Charter has a debt to equity ratio of 1.05 and DirecTV’s stands at only 0.6. These are a few of the reasons why investors should focus more on telecom giants like AT&T Inc. (NYSE:T) or satellite providers if they want exposure to content delivery.  

There are a few distribution companies that have an additional edge over cable distribution companies like Charter. I’ll discuss those in part two.

Wes Patoka owns shares of AT&T. The Motley Fool recommends DirecTV. 

The article Investing in Content Delivery: Part 1 originally appeared on Fool.com.

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