Verizon Communications and AT&T stocks experienced a boost on Tuesday in response to a significant selloff earlier in the week. Reports emerged that the two telecom giants would be conducting tests on potential lead contamination sites.
- Verizon (ticker: (VZ)) stock rose by 3.7% in premarket trading.
- AT&T (T) saw a 2.3% increase in stock value during premarket trading.
This surge follows AT&T’s lowest close in over 30 years on Monday, while Verizon reached a near 13-year low.
On Monday, as analysts attempted to gauge the potential financial consequences for the telecom giants, both stocks experienced a decline. The Wall Street Journal reported on cables over several decades that were covered in lead. Citigroup analyst Michael Rollins downgraded AT&T stock from Buy to Neutral/High Risk, a move similar to J.P. Morgan’s decision.
After the market closed on Monday, Verizon made a statement via Bloomberg, stating that it is currently testing various sites for lead contamination. The company expressed its serious concern regarding lead-sheathed cables and reiterated its commitment to thoroughly reviewing this matter.
AT&T also confirmed that it is conducting additional testing in an email response.
The telecom giants are taking proactive measures to address the reported lead contamination, aiming to address the concerns surrounding cable infrastructure.
The Changing Landscape of the Cable Industry
The Impact of Social Distancing
A Silver Lining Amidst the Slump
Despite the gloomy outlook, Monday’s significant decline in prices may have presented a buying opportunity for some keen investors. The stocks have reached historic lows, making them an attractive option for bargain hunters. One factor that adds to their allure is the generous dividend yield. AT&T, for instance, offers a healthy quarterly dividend of 28 cents, equating to an impressive 8.2% dividend yield based on Monday’s closing prices. In comparison, the S&P 500 has a modest dividend yield of around 1.5%.
The Lingering Lead Issue
On top of the existing challenges, the cable industry is now faced with another pressing problem – the issue of lead. Resolving this matter is no easy feat, as demonstrated by the 19 years of litigation it took for companies such as Sherwin-Williams, Conagra Brands, and NL Industries to agree to pay a settlement of $305 million in a lead paint lawsuit. The long-term financial repercussions of this settlement may not be fully realized for years to come. Nevertheless, investors seem to be taking this setback in stride, exhibiting an improved attitude towards the industry.
Looking Ahead
While recent developments may suggest a positive turn, it is essential to remember that one day does not determine a trend. The cable industry still has a long way to go before a clear trajectory can be established.
