4 Consistently High Paying Dividend Stocks With Growth Potential

AT&T Inc. (NYSE:T) has managed to consistently increase its dividend over the last 3 decades because it has a strong competitive advantage.  The wireless market in the United States is dominated by just 4 companies:

– AT&T

– Sprint (S)

– Verizon (VZ)

– T-Mobile (TMUS)

Together these 4 companies have ~90% market share.  AT&T and Verizon each have over 30% market share.

Competition is reduced when an industry is dominated by only a few large businesses. Lower competition is not good for consumers, but great for the few dominant businesses.

There’s several reasons why the wireless industry is subject to domination by a few large corporations.

1. Brand recognition and scale advantage

2. Up-front costs of building infrastructure

3. Government enforced wireless spectrum usage costs

These characteristics give AT&T its strong competitive advantage and the ability to consistently raise its already high dividend over time.

The company offers investors more than a high dividend and consistency…

AT&T’s earnings-per-share and dividends will very likely continue growing.

AT&T’s growth plans revolve around recent acquisitions of DirecTV (NASDAQ:DTV), Lusacell (a Mexican wireless provider), and Nextel Mexico.

Source:  AT&T 2015 Analyst Presentation, slides 39 and 42

The DirecTV acquisition gives the company better cross-selling opportunities.  It will aslo give AT&T stronger digital content distribution. DirecTV also has a large presence in South America. AT&T will leverage DirecTV’s South American presence over time.

AT&T Inc. (NYSE:T) is focusing on the Mexican market. The company announced it will invest $3 billion to extend its high-speed mobile internet to 100 million Mexican consumers by 2018. 

Customers on AT&T Mexico plans will be able to make calls on their Mexican plan while in the United States to others on AT&T plans. This ‘2 countries, 1 plan’ approach will have wide appeal in Mexico and help AT&T gain market share in the country.

I expect AT&T to grow its earnings-per-share at between 4% and 6% a year over the next several years. Growth will be driven by recent acquisitions and  cost-cutting measures.

Growth combined with the company’s current ~5% dividend yield gives investors expected total returns of 9% to 11% a year.

Among the investors tracked by Insider Monkey, AT&T gained popularity during the third quarter of 2015, with the number of funds with long positions having jumped to 60 from 49. However, these funds held just 1.90% of the company’s stock at the end of September. In the current round of 13F filings, billionaire Mario Gabelli’s GAMCO Investors reported holding 3.91 million shares of AT&T.

The next company on this list is AT&T’s biggest competitor… The company makes an even more compelling investment case than AT&T.