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How AT&T Is Expected to Pay Down Its Debt

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AT&T’s debt levels

As of the third quarter, AT&T’s (T) total debt was $183.4 billion compared to $164.3 billion at the end of 2017. The company’s total debt level rose significantly, mainly due to its acquisition of Time Warner in mid-June 2018.

AT&T is focused on lowering its heavy debt load. The wireless carrier is planning to reduce its debt by ~$20 billion by the end of 2019. How will this work? In 2019, AT&T expects to generate $12 billion in free cash flow after meeting its day-to-day expenses and usual dividend payments. In addition, the company expects to generate at least $6 billion–$8 billion in cash from the sale of some of its assets. As a result, AT&T is committed to reducing its leverage to ~2.5x by the end of 2019.

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AT&T’s dividend yield

AT&T remains committed to paying higher dividends despite its high debt levels. In the current quarter, AT&T will pay a dividend of $0.51 per share, an increase of ~2% from its dividend of $0.50 per share in the previous year’s quarter. AT&T’s dividend yield currently stands at ~7.5%. A company’s dividend yield denotes how much cash shareholders receive for every dollar they invest.

Verizon (VZ) currently has a dividend yield of ~4.5%. Sprint (S) and T-Mobile (TMUS) don’t pay equity dividends.

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