3 Companies With Better Dividends Than AT&T

By Markets Fool.com

AT&T is a favorite among income investors looking for attractive dividend yields. However, long-term investors are better served with well-rounded dividend stocks that offer high dividend growth in addition to yield. Below, three Motley Fool contributors explain why Procter & Gamble , Frontier Communications , and Hasbro are three stocks with better dividends than the telecom giant today.

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(Procter & Gamble): With a dividend yield north of 5%, AT&T seems like an obvious choice for income investors. However, the telecom giant's dividend lacks the critical component of growth that makes owning dividend stocks for many years so rewarding. AT&T's dividend has increased just 11.9% over the past five years, compared to more than a 33% spike in Procter & Gamble's dividend over the same period.

Dividend growth is important because it proves the company is well positioned financially and willing to put its shareholders first. For that reason, I'd rather own shares of Procter & Gamble today versus AT&T because it offers a reliable dividend with the added bonus of continuously rising payouts.

In fact, the consumer goods conglomerate has paid a dividend for the past 124 years without fail. Yet, perhaps more impressive, P&G has increased that dividend for 58 consecutive years at a compounded rate of more than 9% a year. The company increased its dividend 7% to $2.45 per share in fiscal 2014, and returned a whopping $6.9 billion in dividend payments to shareholders during that period.

P&G is in the process of selling some of its under performing brands. However, this shouldn't hurt the company's future cash generation because P&G's core brands (the ones it's keeping) currently account for about 90% of its revenue. Ultimately, it should make Procter & Gamble a more nimble and stronger competitor in the global consumer products space going forward.

(Frontier Communications): AT&T is a highly regarded stock for its hefty dividend yield, but I think there is a better option for income investors in the telecommunications industry. Smaller telecom Frontier Communications may be a superior dividend stock because of its significantly higher dividend yield, as well as its higher dividend growth in the past year. Frontier's dividend clocks in at a 5.8% yield, better than AT&T's 5.5% yield. Plus, Frontier raised its dividend by 5% in December, while AT&T passed through just a 2% bump last year.

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Frontier focuses on wireline communications, but is slowly turning around its business model. Last quarter, Frontier grew revenue from combined business and residential customers sequentially. One of Frontier's strategies is to focus on its key markets and customers, namely small and mid-size cities. It acquires regional assets on the cheap and then reaps significant synergies, such as its $2 billion acquisition of telecom assets in Connecticut from AT&T last year. As soon as the transaction closed, Frontier realized $150 million in annualized cost savings. Frontier is also seeing growth in broadband. Through the first three quarters of 2014, Frontier added 189,000 broadband customers. This was 11% growth year over year. Frontier's residential share grew in 81% of its markets in this time.

Frontier isn't likely to be a growth stock, because its core focus is lower-growth businesses. But it offers value and a very high dividend. And, Frontier generated enough cash flow to even provide a dividend increase last year. For its higher yield and higher dividend growth, Frontier may be a better dividend stock to buy.

Anders Bylund(Hasbro):You have to respect Ma Bell's generous 5.6% dividend yield. Very few stocks can match that payout, and it's all backed by AT&T's massive cash flows.Unfortunately, AT&T's hefty dividend is married to a very disappointing stock.

AT&T shares have gone absolutely nowhere since the network was named as the exclusive launch partner for the first Apple iPhone. The dividend represents the only positive returns for AT&T shareholders over the last eight years.Over the same period, toy and media veteran Hasbro took a generous dividend, paired it with market-beating stock returns by nearly doubling in value, and presented a far stronger value overall:

HAS Total Return Price Chart

HAS Total Return Price data by YCharts

And if you isolate the dividend from the total returns, Hasbro has treated its shareholders to an average dividend boost of 17% a yearalong the way. Meanwhile, AT&T raised its dividends by just 3.6% a yearover the same eight-year span. Remember, we're talking about the golden age of smartphones and connected tablets here, versus a boring portfolio of children's toy brands like My Little Pony and Transformers.

I'll take the unexciting but rock-solid toy maker any day over AT&T's inflexible and ultimately disappointing approach. If AT&T can't outgrow Hasbro's dividends in this era, which seems cherry-picked in Ma Bell's favor, I don't think it will ever happen. That's bad news for AT&T's dividend investors, and a great reason to prefer Hasbro for your long-term income portfolio.

The article 3 Companies With Better Dividends Than AT&T originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. Bob Ciura owns shares of Apple. Tamara Rutter owns shares of Apple. The Motley Fool recommends Apple, Hasbro, and Procter & Gamble. The Motley Fool owns shares of Apple and Hasbro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.