AT&T's 5%-Yielding Dividend: A Growing Safe Haven
Sunday, Oct 27, 2024 6:11 am ET
1min read AT&T, a telecommunications giant, has been a beacon of income for investors with its 5% dividend yield, which is significantly higher than the S&P 500's yield of less than 1.5%. While this higher yield comes with a higher risk profile, AT&T's dividend has been growing safer each quarter, as evident in its recent third-quarter earnings report.
AT&T's dividend payout ratio has evolved over time, with the company resetting its payout in 2022 after the spin-off of its former media division. The reset, which cut the dividend by nearly 50%, was a strategic move to retain more cash for growing its fiber and mobility businesses and reducing debt. This strategy has paid off, as AT&T's free cash flow has increased by $2.4 billion year-to-date compared to the same period in 2023, enabling the company to repay debt and reduce its leverage ratio.
AT&T's dividend growth rate has been steady, with the company expecting its leverage ratio to reach its target in the 2.5 times range in the first half of next year. This would put it around the current level of its chief rival, Verizon, which has lowered its leverage ratio from 2.6 times to 2.5 times over the past year. While Verizon's leverage ratio will rise after its $20 billion all-cash deal for Frontier Communications, AT&T's should continue to fall, thanks to its strategic initiatives and debt reduction efforts.
AT&T's revenue growth and earnings per share (EPS) performance have contributed to its dividend safety and growth. Despite mixed third-quarter results, with revenue ticking down 0.5% and adjusted EPS falling 6.3%, AT&T's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 3.4% on strong mobility performance and growth in its fiber business. The company added more than 200,000 fiber customers for the 19th straight quarter and consistently grew its mobility business.
AT&T's dividend payout ratio compares favorably to its peers and industry averages, with the company's high-yielding dividend becoming a safer option for those seeking a stable income stream. While AT&T does lag behind Verizon in some areas important to dividend investors, it could catch up in the coming years as its strategic initiatives, such as its fiber and mobility businesses, continue to strengthen its balance sheet.
In conclusion, AT&T's 5%-yielding dividend continues to grow safer, thanks to the company's strategic initiatives, debt management strategy, and improving financial metrics. As AT&T's free cash flow rises and its leverage ratio falls, investors can expect the company's high-yielding dividend to remain a stable and attractive income source.
AT&T's dividend payout ratio has evolved over time, with the company resetting its payout in 2022 after the spin-off of its former media division. The reset, which cut the dividend by nearly 50%, was a strategic move to retain more cash for growing its fiber and mobility businesses and reducing debt. This strategy has paid off, as AT&T's free cash flow has increased by $2.4 billion year-to-date compared to the same period in 2023, enabling the company to repay debt and reduce its leverage ratio.
AT&T's dividend growth rate has been steady, with the company expecting its leverage ratio to reach its target in the 2.5 times range in the first half of next year. This would put it around the current level of its chief rival, Verizon, which has lowered its leverage ratio from 2.6 times to 2.5 times over the past year. While Verizon's leverage ratio will rise after its $20 billion all-cash deal for Frontier Communications, AT&T's should continue to fall, thanks to its strategic initiatives and debt reduction efforts.
AT&T's revenue growth and earnings per share (EPS) performance have contributed to its dividend safety and growth. Despite mixed third-quarter results, with revenue ticking down 0.5% and adjusted EPS falling 6.3%, AT&T's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 3.4% on strong mobility performance and growth in its fiber business. The company added more than 200,000 fiber customers for the 19th straight quarter and consistently grew its mobility business.
AT&T's dividend payout ratio compares favorably to its peers and industry averages, with the company's high-yielding dividend becoming a safer option for those seeking a stable income stream. While AT&T does lag behind Verizon in some areas important to dividend investors, it could catch up in the coming years as its strategic initiatives, such as its fiber and mobility businesses, continue to strengthen its balance sheet.
In conclusion, AT&T's 5%-yielding dividend continues to grow safer, thanks to the company's strategic initiatives, debt management strategy, and improving financial metrics. As AT&T's free cash flow rises and its leverage ratio falls, investors can expect the company's high-yielding dividend to remain a stable and attractive income source.
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