Tags: AT&T | stock | investing | retirement

Why AT&T Is Retirement Insurance

Why AT&T Is Retirement Insurance

Friday, 20 November 2015 10:20 AM

AT&T Inc.’s stock can provide solid retirement insurance by following a plan of buying $12,000 of the shares every year and letting dividend repurchases grow over time.

That’s the message from investment adviser Eli Inkrot in a SeekingAlpha blog that illustrates the power of compounded dividends. AT&T traded at about $34 a share on Nov. 20.

“Imagine if you could get your hands on one share of AT&T per day. Today that's investing roughly $1,000 a month into the security,” he writes. “Once you pass the five-year mark you could have your hands on 2,060 shares pumping out $4,300 in annual dividends.”

Median household income in the U.S. was $54,657 in 2014, according to the Census Bureau. 

After 20 years of buying $12,000 a year of the stock and reinvesting dividends, the AT&T holdings would provide $35,000 a year in dividends. Of course, inflation and taxes would eat into the purchasing power.

“Granted the purchasing power of these payouts might "only" be around $20,000 or so, but that's still a sizable cash flow,” Inkrot writes. “That's the sort of cash flow that allows you to have some solid financial flexibility.”

The important thing for investors to remember is that dividend investing can have a lasting impact over time, he says.

“In the beginning it's difficult to see the process developing. You might collect a $10 or $40 dividend check and think, ‘this is nice, but it's not life changing,’” he says. “But if you stick with it long enough it could very well be the type of thing you look back and realize, ‘I'm sure glad I started.’”

CNBC commentator Jim Cramer recommends buying stocks that will be immune to a hike in interest rates.

"From now on we must accept that stocks are going to be punished by Fed chatter, no matter what happens with commodities or the averages or even the data, because the Fed wants to raise rates," Cramer added.

“Cramer recommended investors own companies that don't need to worry about a rate hike. That group includes FANG — Facebook, Amazon, Netflix and Google, CNBC reported.

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AT T Inc.'s stock can provide solid retirement insurance by following a plan of buying $12,000 of the stock every year and letting dividend repurchases grow over time.
AT&T, stock, investing, retirement
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2015-20-20
Friday, 20 November 2015 10:20 AM
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