AT&T Inc. (NYSE: T) Investors are expected to receive a payment of $ 0.52 per share on November 1. Based on this payment, the dividend yield on the shares of the company will be 7.6%, which represents an attractive increase in returns for shareholders.
See our latest review for AT&T
AT&T distributions can be difficult to maintain
If the payments are not sustainable, a high return for a few years will not matter much. While AT&T is not profitable, it pays less than 75% of its free cash flow, which means there is a lot left to reinvest in the business. In general, cash flow is more important than more traditional profit metrics, so we feel pretty comfortable with the dividend at this level.
Recently, EPS fell 22.9%, which could continue next year. This means that the company will not be profitable, but the cash flow is more important when you consider the dividend and since the current cash payout ratio is quite healthy, we don’t think there are too many reasons. to worry.
AT&T has a solid track record
The company has a long history of paying stable dividends. The first annual payment in the past 10 years was US $ 1.72 in 2011, and the most recent year’s payment was US $ 2.08. This implies that the company has increased its distributions at an annual rate of approximately 1.9% over this period. Slow, steady dividend growth may not sound so exciting, but dividends have been stable for the past decade, which we think makes a pretty attractive offer.
The potential for dividend growth is fragile
Some investors will be eager to buy a portion of the company’s stock based on its dividend history. However, initial appearances can be deceptive. AT & T’s EPS has fallen about 23% per year over the past five years. Such rapid declines certainly have the potential to restrict dividend payments if the trend continues in the future.
Overall, we don’t think this company is generating a good stock of dividends, even though the dividend has not been reduced this year. The company brought in a lot of money to cover the dividend, but we don’t necessarily think that makes it a great dividend stock. We don’t think AT&T is a great stock to add to your portfolio if income is your goal.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. However, there are other things for investors to consider when analyzing the performance of stocks. For example, we have chosen 2 warning signs for AT&T that investors should be aware of before committing capital to this stock. Looking for more high yield dividend ideas? Try our organized list of big dividend payers.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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