AT&T’s debt levels
AT&T (T) ended the fourth quarter with short-term debt of $10.3 billion, while its long-term debt was $166.3 billion, bringing its total debt to $176.5 billion. AT&T’s total debt was $164.3 billion as of December 31, 2017. The telecommunications company’s debt levels increased significantly due to its acquisition of Time Warner in June 2018.
As a result, AT&T’s priority remains the deleveraging of its business using its free cash flow. The company plans to reduce its leverage to ~2.5x by the end of 2019 and return to historical levels of ~1.8x by the end of 2022.
AT&T’s dividend yield
However, AT&T remains committed to paying higher dividends. In the fourth quarter of 2018, the company returned $3.6 billion to investors in the form of dividends. AT&T declared a dividend of $0.51 per share in the quarter, implying dividend growth of ~2.0% on a YoY (year-over-year) basis. Its quarterly dividend was equivalent to an annualized dividend of $2.04 per share and a dividend yield of ~6.7% as of February 15. In comparison, Verizon (VZ) has a dividend yield of ~4.4%. Sprint (S) and T-Mobile (TMUS) don’t pay equity dividends.
In the fourth quarter, AT&T a reported free cash flow balance of $7.9 billion compared to $4.5 billion in the fourth quarter of 2017, which supported its generous dividend payout. Its cash flow from operations increased ~26.7% YoY to $12.1 billion in the fourth quarter. Its total capex was $4.2 billion in the fourth quarter compared to $5.1 billion in the fourth quarter of 2017.