1. AT&T

First up is AT&T (NYSE: T). Telco companies tend to underperform the overall market during normal times. But as the US braces for a recession, the likes of AT&T are likely to outperform due to having defensive attributes. It’s for this reason that the S&P 500 stalwart’s share price has remained steady this year.

As such, this dividend stock could be an attractive place for me to invest my money. That’s because telecommunication services have rather inelastic demand. Management confirmed this in its latest earnings report, as it saw customer demand remain relatively healthy.

For that reason, I’m expecting its current dividend yield of 5.8% to remain robust. Meanwhile, Morgan Stanley is projecting the firm’s dividend yield at 6% in 2023. This minuscule growth isn’t too far fetched considering the state of its current balance sheet, which can barely cover its dividends at -0.4 times.

2. Philip Morris

Next is Philip Morris (NYSE: PM), one of the world’s most popular dividend stocks. Although operating in a sunset industry, the tobacco giant has performed admirably this year, beating the S&P 500 by 22%. The company has also been diversifying its business model to venture into other industries, such as food and beverage. This acts as a bonus for me, as it allows the conglomerate to hedge against the tobacco industry’s declining prospects.

Most importantly, its current dividend yield of 5% puts it higher than the S&P’s average, and is an attractive proposition for me given the current market conditions. Additionally, Morgan Stanley projects the company’s dividend yield to tick up to 5.7% in 2023, which it can comfortably cover with its strong cash flow and dividend cover of 1.1 times.

3. Energy Transfer

Finally, there’s Energy Transfer (NYSE: ET). The Houston-based firm is one of the leading suppliers of natural gas from the US. Given the elevated oil and energy prices this year, it’s no surprise that its stock is up 40%, while being able afford a dividend yield of 8.5%.

This makes Energy Transfer one of the highest dividend yielding stocks out there. In fact, its current dividend yield is more than three times the S&P 500 average. Beyond that, Morgan Stanley is also projecting its dividend yield to grow to 10.3% in 2023. With a robust dividend cover of 1.3 times, this is highly likely. Therefore, this makes it an attractive play for me, especially when natural gas is in high demand given the sanctions imposed on Russia.

The post 3 handpicked US dividend stocks with high yields to buy in December appeared first on The Motley Fool UK.

Buyout failure could bully prices lower

A potential takeover of UK telecoms giant Vodafone dominated investor message boards during the first half of the year, although much of this chatter has since died down. Rumours around a potential move from US giant AT&T reached fever pitch around the turn of the year, a phenomenon that propelled Vodafone’s share price to all-time highs back in February 252.3p per share. But prices have since conceded more than a fifth as takeover talk has dissipated.

AT&T was forced to declare to the London Stock Exchange in January that it had no immediate intention to acquire its UK rival, although the company was widely expected to come back six months later in accordance with exchange regulations. Vodafone is seen by many as an obvious target given the American firm’s stated desire to expand in Europe.

Another bid is not entirely out of the question, of course — the six-month period expires at the end of this month — but AT&T’s decision in May to merge with satellite TV provider DirecTV for $48.5bn would seem to take a potential bid for Vodafone off the table.

Meanwhile, gossip surrounding another potential purchaser in Japan’s SoftBank has also receded following the firm’s approach for T-Mobile USA. The Asian company’s Sprint division in the US has been locked in talks with T-Mobile majority owner Deutsche Telekom for almost a month now to merge with its peer for $32bn.

On top of this, Vodafone itself has been busy circling the wagons to deter potential bidders by conducting a variety of its own acquisitions in recent months. Takeover chatter was exacerbated when the firm divested itself of its 45% stake in Verizon Wireless back in February for $130bn, so Vodafone’s strategic asset stacking since then could be deemed a conscious attempt to deter predators.

The company made its first foray into the ‘triple services’ — i.e. the broadband, television and telephone — market last year when it acquired cable giant Kabel Deutschland for a cool €7.7bn. Since then it has forked out a cool €7.2bn to purchase Spanish multi-services provider Ono, bought out its remaining stake in Vodafone India (taking the total transaction cost to £1bn), and acquired Italian telematics specialist Cobra Automotive Technologies for €145m.

Both AT&T and SoftBank’s proposed deals are still to get the green light from regulators, meaning that a return for the UK company cannot be completely ruled out. But should these deals get signed off as widely expected, and fresh suitors for Vodafone fail to come to the fore, I believe that further rounds of share price weakness are very much on the cards.

The post Why Evaporating Takeover Talk Could Send Vodafone Group plc Plummeting appeared first on The Motley Fool UK.

Vodafone (LSE: VOD) (NASDAQ: VOD.US) shares dropped 5% this week after AT&T (NYSE: T.US) ruled out bidding for the company, after being requested to confirm its intentions by the UK Takeover Panel. That’s the superficial story, but in reality it’s more complex.

According to stock market rules AT&T’s statement merely precludes it from bidding for Vodafone within six months, except in certain circumstances. But whatever its intentions, AT&T was hardly likely to make a move within that timeframe.

First, the dust has to settle on Vodafone’s disposal of its 50% interest in VZW and the ensuing return of capital to shareholders. And there are strong reasons for AT&T waiting for the outcome of an EU regulatory ruling that isn’t due until May.

Oligopolies

The EU’s competition authorities are deciding whether to allow the merger of the German subsidiaries of European mobile operators Telefónica and KPN. They are the number three and four players in the market, and the commission’s decision will set the tone for how much consolidation is permitted.

With Labour leader Ed Miliband calling for the break-up of the ‘big four’ banks and the ‘big six’ energy companies in the UK, oligopolies could become a hot topic in Europe and the telecoms sector could be in the line of fire.

Also within the next six months, the European parliament is set to vote on proposals to create a ‘digital single market’ that will simplify cross-border investment, marketing and operations, opening up potential Europe-wide economies of scale.

Both of those aspects — consolidation and cross-border regulation — are vital to AT&T’s ambitions in Europe. They set the boundaries for how much potential there is, and hence how big an appetite AT&T will have for Vodafone or any other European acquisition. What’s more, Vodafone will report full-year results in May. Why wouldn’t AT&T wait?

But if it’s important for AT&T, it’s also important for Vodafone. These regulatory decisions will affect how much Vodafone is worth to a bidder.

Cynic

That makes the timing of the Takeover Panel request look odd. After all, the speculation has been around for some months. The cynic in me wonders if it was prompted by Vodafone. It plays quite well for the company to take the froth off its shares at the time when it executes the share consolidation following the VZW sale. There will be a lot of attention focused on Vodafone’s prospective yield, and with forecast operating profit dropping from £12bn to £5bn after the disposal, Vodafone’s valuation will look stretched.

If that’s the game, the market has seen through it. A 5% fall doesn’t take much of the speculative element off the shares. My rough estimate is that Vodafone is worth 190p a share on its own, versus 280p cited as a takeover price. The current price reflects the market’s view of how likely there will be some form of corporate action.

The post Vodafone Group Plc: Who’s Bluffing? appeared first on The Motley Fool UK.

This morning, the US telecoms provider AT&T (NYSE: T.US) put an end to a different line of conjecture that it would bid for Vodafone. A statement to the London Stock Exchange read: “At the request of the UK Takeover Panel, AT&T confirms that it does not intend to make an offer for Vodafone.”

Speculation had been raging for months that AT&T was contemplating a bid for the FTSE 100 member, ever since the UK company sold off its stake in Verizon Wireless. That particular deal, worth £84 billion, pushed Vodafone shares up 50% since the beginning of 2013 as investors awaited the potential windfall.

Vodafone is now a much smaller company after the Verizon sale with forecasted operating profit of £5 billion for the fiscal year ending March 2015. This is down significantly from the £12 billion for the current year.

It remains to be seen whether any potential bidders remain, with City experts previously suggesting the Japanese firm SoftBank could be interested. Whether Vodafone remains an appealing option is unclear.

If a third party like Softbank entered the Fray, or should Vodafone’s board agree to it, AT&T could yet return to the table.

With a market cap of £113 billion Vodafone’s shares currently trade at 26 times expected earnings and offer a prospective dividend yield of 4.5%.

The post AT&T Inc. Ends Vodafone Group Plc Bid Speculation appeared first on The Motley Fool UK.

The Beginners’ Portfolio is a virtual portfolio, which is run as if based on real money with all costs, spreads and dividends accounted for.

For a long time before Vodafone Group (LSE: VOD) (NASDAQ: VOD.US) sold its stake in Verizon Wireless, it had been clear that the 45% ownership did not suit either of the interested parties. And one of the mooted solutions was a merger of some sort between Vodafone and Verizon Communications — though that idea proved way too complicated to really get much of a foothold.

Fresh rumours

But if the latest rumours from Bloomberg are to be believed, we could be on for a similar mega-deal, with AT&T (NYSE: T.US) said to be shaping up for a takeover bid some time in early 2014. Chief executive Randall Stephenson has already spoken of “huge opportunities” in Europe, and America’s biggest telecoms giant is unlikely to be eyeing up the continent’s smaller operators. Vodafone would provide a massive enlargement of AT&T’s global presence.

With AT&T reporting $127bn (£80bn) in sales for the year to December 2012 and Vodafone turning over £44bn as of March 2013, we’d be looking at formidable global telecoms company should a deal go ahead. Who wouldn’t want some of that?

The talk was enough to send Vodafone shares up around 3% — as I write, they’re standing at 228p, up 35% since we added them at 168.5p. But what would a Vodafone takeover mean for the Beginners’ Portfolio?

Sell, sell, sell!

It means I’d sell, and here’s why.

If an all-cash buyout were to happen, then the answer would be simple — take the cash and then look for somewhere to invest it. But that’s just not realistic, and any deal would surely end up with shareholders getting shares in the combined firm in exchange for their current individual stakes.

What we should be doing is looking at it as if we actually were getting cash, and then we should decide if we would invest that cash in AT&T — if we wouldn’t buy AT&T shares with our own cash, we should have no business taking merger shares. So would I buy AT&T?

Well, if I wanted to build a portfolio of US stocks, it’s actually one I’d give serious consideration to — it’s a cash cow offering dividend yields of around 5%. But I can get payouts like that closer to home, and at lower P/E valuations than AT&T’s 24 — the NYSE has a higher average P/E than the FTSE at about 20, but 24 is still a bit of a premium.

Don’t buy what you don’t know

But the key for me is that AT&T is just not a company I have any real familiarity with. I haven’t been following it at all over the years (as I have with a lot of UK shares, and with Apple), and I’ve spent no time at all looking at its annual results. And I don’t buy what I don’t know.

Now, you might argue that as I like Vodafone so much, accepting a stake in the combined entity means we’d still be holding on to it in a slightly diluted form. But things won’t be that simple — the rumours suggest AT&T would keep some bits and sell off others, so Vodafone as we know it would almost certainly be gone.

Also, as this is a portfolio aimed at beginners who will most likely be starting off entirely (or at least, largely) invested in the UK, I don’t want 20% of our companies to be US ones — one is enough for educational purposes.

If a formal approach does emerge and is successful, I trust Vodafone’s management to get the best deal they can for their shareholders — and I’d expect to see a share price hike just like the Verizon one.

That will be my signal to sell.

The post The Beginners’ Portfolio: AT&T Inc. vs Vodafone Group plc Is Scary! appeared first on The Motley Fool UK.

Bloomberg reported yesterday that the American group was exploring the possibility of incorporating Vodafone’s best assets and selling off others in a possible takeover deal, citing “people familiar with the situation”.

These rumours aren’t new, as they surfaced during Verizon‘s talks with the British-based telecoms company before the former bought out Vodafone’s share in joint-venture Verizon Wireless. But this is the first time there seems to potentially be some substance behind the claims.

It’s well known in the industry that AT&T has been looking to spread its reach into Europe, with chief executive Randall Stephenson talking up the opportunities in the continent. Vodafone rival EE has also been considered in the past, but City talk is now focused on the FTSE favourite.

Stephenson eyes Europe in part due to its relatively slow-paced adoption of advanced wireless options, while it’s also falling behind Verizon in capturing new customers in the US. A takeover of Vodafone would offer new markets to tackle, should a deal come to fruition.

The post Vodafone Group Plc On The Rise After AT&T Inc. Takeover Rumours Emerge appeared first on The Motley Fool UK.