05-13-2014, 10:15 AM
(05-13-2014, 09:59 AM)Jason Wrote: What do you think about At&t purchasing Direct tv.? A couple of analysis that I was listening to this morning suggested that it was a cash flow move to cover the dividend.
I am not terribly familiar with either stock but I think that line of thinking does have some merit. DTV is fairly cheap considering its growth rate as it trades at just 13x forward earnings, and according to FAST Graphs trades at just 7.4x free cash flow.
I think if the takeover is financed mostly with cheap debt rather than shares it would make sense for AT&T. The company has an A- credit rating and should be able to get long term debt for less than the 5% dividend payout on its own shares.
I suppose the deal makes sense as it would provide AT&T with a new customer base and a large presence in Latin America. At first glance, and with my very limited research, it makes sense to me if done at the right price and with the right financing.