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Inside AT&T’s Financial Deleveraging Efforts

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AT&T’s financial leverage

AT&T (T) is committed to reducing its net debt going forward. The company is targeting a net debt-to-EBITDA ratio of 2.5x by the end of 2019. During the Deutsche Bank Media, Internet and Telecom Conference held on March 13, John Stephens, AT&T’s chief financial officer, talked about AT&T’s deleveraging plan. Stephens stated, “With $26 billion of free cash flow we can expect to contribute about $12 billion net debt paid down from the free cash flow in excess of dividend.” In addition, “We feel very good about our ability to generate $6 billion to $8 billion of assets sales.”

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AT&T’s debt levels

On December 31, 2018, AT&T’s total debt was $176.5 billion as compared to $164.3 billion at the end of December 31, 2017. AT&T remains committed to paying higher dividends in spite of higher debt levels. The telecom company had declared a quarterly dividend of $0.51 per share in the fourth quarter of 2018, implying dividend growth of ~2.0% on a year-over-year basis. The quarterly dividend was equivalent to an annualized dividend of $2.04 per share and a dividend yield of ~6.7% as of March 14. By comparison, Verizon Communications (VZ) has a dividend yield of ~4.2%. T-Mobile (TMUS) and Sprint (S) don’t pay equity dividends.

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