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AT&T: The Benefits Of Range-Bound Prices


Is a narrow trading range bad?

It depends on your goals and time horizon.

Long-term investors should root for undervaluation.

While reviewing our investment accounts and spreadsheets at the end of the first quarter, something about AT&T (NYSE:T) caught our attention. For the last five years or so, this position has been up only marginally but we weren't deterred by it as, like many, we hold this stock for income. Although we are reinvesting the dividends, just knowing that AT&T will deposit a fixed amount each quarter makes it worthwhile.

With AT&T recently breaking out from its trading range in the low to mid thirties, this position is suddenly up substantially. Obviously, this is due to capital appreciation for most part but not entirely as 12% of our AT&T shares have been accumulated through dividend reinvestment over these years. With the price stuck in a narrow trading range for almost four years, the dividend reinvestment helped us accumulate more shares cheaper. That brings us to the topic of this article. The benefits of a stock being range-bound.

Now that AT&T has broken out to nearly $40, should...