AT&T's Media Dream Gives Yield Chasers Nightmares

AT&T Inc.'s plans to buy Time Warner Inc. for $85 billion is running into possible resistance from both presidential candidates. The takeover should also be raising eyebrows among another group of interested parties: investors in the many exchange-traded funds and mutual funds that count the telecom behemoth as one of their top holdings.

AT&T ticks off many of the boxes that equity investors have sought in recent years: a healthy dividend yield and a history of increasing those dividends with a stable, reliable business that rarely leads to huge volatility in the share price. Shares like these are often called "widow and orphan stocks" because they're perfect for the type of investors who want steady, worry-free income. The ranks of these investors have swollen significantly this year -- crowded by those left orphaned and widowed by bonds that pay record-low yields.

As a result, it's remarkable how many ETFs count the stock as one of their top holdings, with strategies based on everything from dividends to the technology industry to low volatility, even to momentum-chasing:

Nowhere is its importance more eye-popping than in the ETFs focused solely on the telephone industry: