Motley Fool: Solid business, fat dividend

AT&T (NYSE: T) is a stable business with a sky-high dividend yield – recently more than 5.6%. A few years ago, the telecom giant was not the kind of stock you could buy and forget. Its foray into the media business was turning into an expensive disaster, muddling the results of the core wireless business.

AT&T has since shed its media assets, completing its transition last year back to a pure telecom company with the separation of WarnerMedia. Its story is now dead simple: wireless and fiber internet. AT&T can focus its efforts and its resources on growing both businesses, and its ample cash flow generation fuels a solid dividend.

AT&T isn’t immune to a tough economic environment, but what it sells is about as necessary as electricity and water for most people. The company expects wireless service revenue growth of at least 4% in 2023 – not a bad result, given the economic backdrop. In the fiber business, it plans to reach over 30 million homes and businesses by the end of 2025, up from 22 million at the end of 2022.

Meanwhile, AT&T is cutting costs, which will help it meet its goal of producing $16 billion in free cash flow this year. That’s up from $14.1 billion in 2022 and more than enough to support the current dividend. What’s left over can help the company reduce its debt.

Long-term investors, especially those seeking income, should give AT&T a closer look.

Ask the Fool

Q. I know that Warren Buffett’s company, Berkshire Hathaway, owns lots of stocks, like Coca-Cola. Can I get the same return as Berkshire by buying the same stocks? – N.D., Sacramento, California

A. Nope. The company does own shares of many stocks, such as Apple, Bank of America, Chevron and American Express. But you can’t duplicate their performance exactly, because Berkshire’s holdings are generally only reported quarterly via required filings with the Securities and Exchange Commission.

You might buy or sell the same stocks that Buffett or his investing lieutenants do, but you can’t do so at the same time as they do, so you probably won’t be buying at the same price.

Also, there’s much more to Berkshire Hathaway. It entirely owns many businesses in which you can’t invest directly. These include Benjamin Moore, Brooks, Duracell, Forest River, Fruit of the Loom, GEICO Auto Insurance, International Dairy Queen, Johns Manville, Justin Brands, McLane, NetJets, Pampered Chef, Pilot Travel Centers, See’s Candies and the BNSF railroad.

There is a way to have your returns match Berkshire’s, though: You can simply buy stock in Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) itself. (The Motley Fool owns shares of and has recommended Berkshire Hathaway.)

Q. What are audited financial statements? – G.L., Manteo, North Carolina

A. The SEC requires publicly traded companies (those you can buy or sell shares of in the U.S. stock market) to issue quarterly reports (10-Qs) and annual reports (10-Ks). They typically contain financial statements such as balance sheets, income statements and statements of cash flow.

The annual report is generally much more detailed, and its financial statements are required to be reviewed and reported on by an independent auditor – often an accounting firm.

My dumbest investment

Way back in the 1980s, I knew that I should start planning for my future. I was making good money at the time due to having a job with nearly unlimited overtime. The best available options were savings accounts, which all paid about 5%. I walked into a Dean Witter Reynolds office and asked what I could do to get started with investing. I assumed I was getting good advice when I was told to invest money monthly into a mutual fund. Not knowing anything about load fees, I got signed up for the best investment ever – for the salesman. He got nearly 6% upfront, and I also got the pleasure of paying a 2% fee when I sold. When I did eventually sell, I barely got back my initial investment. – C.Y., online

The Fool responds: It’s not necessarily bad advice to invest in a mutual fund, but those with heavy “loads” (fees) are best avoided. There are also thousands of no-load funds out there these days, so it’s easy to avoid investing in one.

For many (perhaps most) investors, the best kind of mutual fund is a low-fee, broad-market index fund, which simply invests in the many stocks that make up the index it tracks. It’s an easy way to earn roughly the market’s return without having to learn how to study stocks.