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Did AT&T's (NYSE:T) Share Price Deserve to Gain 22%?

Simply Wall St

The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the AT&T Inc. (NYSE:T) share price is 22% higher than it was a year ago, much better than the market return of around 14% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 9.0% in three years.

See our latest analysis for AT&T

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last year, AT&T actually saw its earnings per share drop 34%.

So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

For starters, we suspect the share price has been buoyed by the dividend, which was increased during the year. It could be that the company is reaching maturity and dividend investors are buying for the yield, pushing the price up in the process. Though we must add that the revenue growth of 6.1% year on year would have helped paint a pretty picture.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NYSE:T Income Statement, February 25th 2020

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think AT&T will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of AT&T, it has a TSR of 29% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that AT&T has rewarded shareholders with a total shareholder return of 29% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 7.7% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand AT&T better, we need to consider many other factors. Take risks, for example - AT&T has 4 warning signs we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.