Dividends Versus Capital Gains: Has AT&T Been A Better Investment Than Visa?

I’m a shareholder in both AT&T Inc. (T) and Visa Inc. (V), as you can see by perusing my FIRE Fund.

The FIRE Fund is my real-money early retirement stock portfolio. I live off of the dividend income it generates on my behalf.

I bought shares in both AT&T and Visa around the same time, between mid-2014 and early 2015.

My position in Visa was initiated in July 2014.

And I added to my stake in AT&T In January 2015.

Of course, as I’ve always been, I was transparent about both investments when they were made. I wrote up each respective investment thesis and shared these moves with the world.

I remember that a lot of readers were very supportive of the AT&T buy.

But many thought the investment in Visa was a bad move. I actually remember the word “speculative” coming up a number of times in comments.

Anyway, Visa’s stock has gone stratospheric since that time. My investment has more than tripled in value.

Meanwhile, AT&T’s stock has mostly tread water since that buy in early 2015.

But could a case be made that AT&T has been the better investment? 

Absolutely.

CAPITAL GAIN

Let’s break this down a bit.

I’ll first go over the capital gain from the respective investments.

I bought 50 shares of AT&T on 1/28/15 for $33.18 per share.

AT&T’s stock is now priced at $37.05.

That’s a capital gain of $193.50, or 11.66%.

I bought 20 (split-adjusted) shares of Visa on 7/9/14 for (a split-adjusted) $53.83 per share.

Visa’s stock is now priced at $174.88.

That’s a capital gain of $2,421.00, or 224.9%.

DIVIDEND INCOME

If we were looking at capital gain, it’s not even a contest.

Visa would be the far, far superior investment thus far. It’s produced much more capital gain – both in dollar and percentage terms.

But capital gain is only part of the picture.

Total return is, of course, the sum of capital gain and investment income.

So in order to get a better picture of how these two investments have stacked up, we need to look at the dividend income they’ve both produced to date.

Those 50 shares of AT&T produced $70.50 in dividend income for 2015, $96.00 in dividend income for 2016, $98.00 in dividend income for 2017, $100.00 in dividend income for 2018 and $102.00 in dividend income for 2019 (including the upcoming announced Q4 dividend).

That’s a total of $466.50 in dividend income on shares that cost me $1,659.00.

So I’ve received 28% of my investment back from dividends alone, at least thus far.

AT&T stock is a classic high-yielding, low-growth dividend growth stock.

It’s stock currently yields 5.45%. So you’re getting a lot of ongoing income. But its dividend growth rate is quite low, with annual dividend increases coming in around the ~2% mark over the last five years.

And you can see that playing out in the above numbers. The dividend income on that 50 shares barely moves up from year to year; however, the aggregate amount of dividend income still stands as significant because of the high starting yield.

If we were to break this down to yield-on-cost, AT&T’s stock is now yielding me 6.15% on my original invested money.

So that’s AT&T.

Meanwhile, my 20 shares of Visa produced $4.40 in dividend income for 2014, $10.00 in dividend income for 2015, $11.70 in dividend income for 2016, $13.80 in dividend income for 2017, $17.60 in dividend income for 2018, and $24.44 in dividend income for 2019 (not yet including the unannounced Q4 2019 dividend).

1 2 3 4
View single page >> |

Disclosure: I’m long T and V.

If you’re interested in using dividend growth investing to become financially independent and retire early for yourself, check out my two ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.