AT&T's Dividend Yield of 4.7% is Progressively Becoming More Protected and Reliable
In the wheels of change, AT&T (T 0.83%) has faced scrutiny regarding its dividend sustainability, particularly in recent years. The telecom giant took drastic measures to preserve cash, slashing its payout by nearly half in 2022. The strategy, however, bore fruit with time, as the company's financial health showed notable improvement.
Looking ahead to 2025, AT&T's financial metrics paint a rosy picture. The telecom titan anticipates continuing its streak of growth, citing a steady trend of revenue and earnings expansion. This, in turn, makes AT&T an intriguing prospect for investors seeking a reliable income stream, with its current dividend yielding a modest 4.7%.
Shining from the Past
AT&T's 2024 financial performance was nothing short of remarkable. Reporting impressive growth across its mobile and broadband services, the company surpassed its earnings forecasts while maintaining massive free cash flows. These revenue influxes and solid financials not only continued AT&T's upward trajectory but also enabled it to pay off its debt and boast a noticeably lower leverage ratio.
Gearing Up for the Future
Full steam ahead, AT&T expects another substantial year in 2025. Their revenue expansion plans forecast moderate growth, with mobile services revenue rising between 1-3% and consumer fiber broadband revenue increasing mid-teen percentages. This anticipated expansion goals would further bolster the company's adjusted EBITDA.
However, AT&T expects a slight dip in adjusted earnings, with projections in the range of $1.97-$2.07 per share while excluding DIRECTV investments. Undeterred, the company projects producing more than $16 billion in free cash flow post-capital investments, which will exceed its dividend outlays by a significant margin.
This extra cash will empower AT&T to aggressively deleverage its balance sheet, aiming to hit its 2.5x leverage target in the first half of 2025. With thisProgress in check, the company plans to return cash to shareholders through share repurchases in the second half of the year, using its newly approved $10 billion authorization.
A Rock-Solid Income Stream
AT&T's transformation from a troubled payout provider to a promising income generator is a testament to the company's strategic recalibrations. While the company does not make any plans to boost its dividend as of now, its current and potentially future dividend payments hold promising stability, making it an attractive choice for investors seeking a continuous income stream.
In light of its financial success and improved dividend sustainability, AT&T has become an attractive investment opportunity for those seeking a reliable income stream, with its current dividend yielding a modest 4.7%. With expected free cash flows exceeding its dividend outlays by a significant margin in 2025, AT&T plans to further deleverage its balance sheet and potentially return cash to shareholders through share repurchases, underscoring the stability of its dividend payments.
