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Bank of America Finds AT&T’s Dividend Yield Attractive

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Jun. 27 2019, Published 7:53 a.m. ET

AT&T’s healthy cash flows

AT&T (T) reported free cash flow of $5.9 billion in the first quarter, which more than doubled from the previous year’s quarter. Its cash flow from operations also increased 23.5% YoY (year-over-year) to $11.1 billion. Its capex fell 15.3% YoY to $5.18 billion in the quarter. AT&T expects its free cash flow to increase ~16.1% YoY to $26 billion in 2019.

At the end of the first quarter, AT&T’s long-term debt was $163.9 billion, while its short-term debt was $11.5 billion. AT&T’s net debt balance was $168.9 billion in the quarter. Its debt increased after its $85.4 billion acquisition of Time Warner.

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AT&T’s dividend yield

Despite its high debt, AT&T remains committed to paying higher dividends. Analyst David Barden of Bank of America Merrill Lynch stated at the J.P. Morgan Global Telecom Conference last week, “The company’s cash flow and dividend yields are particularly attractive.” In the first quarter, the US mobile carrier returned $3.7 billion to its shareholders in the form of dividends, higher than the previous quarter’s dividend payment of $3.1 billion.

AT&T’s quarterly dividend of $0.51 per share in the first quarter was ~2% higher than its dividend in the first quarter of 2018. Its quarterly dividend of $0.51 was raised in the fourth quarter of 2018, marking the 34th consecutive year of a dividend hike. The company’s annual dividend is $2.04 per share with a dividend yield of 6.3% as of June 24. In comparison, AT&T’s peer Verizon has a dividend yield of 4.14%.

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