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Citi downgrades AT&T citing crowded dividend trade

AT&T employee assists a customer with a cellphone.
Alex Wong | Getty Images

Citi Research lowered its rating for AT&T to neutral from buy citing the crowded dividend trade which may reverse if interest rates rebound.

"The rally for mega-cap Telco stocks began, in our view, with their defensive characteristics and quickly slipped into becoming beneficiaries for a low rate environment, even though fundamental performance have been arguably mixed for the industry and specifically for AT&T and Verizon," Citi's Michael Rollins wrote in a note to clients Thursday.

"Our lowered rating contemplates the investor demand for dividend yield, which has benefited the shares in recent periods and put valuation multiples near historic highs."