AT&T’s dividend looks sustainable

Article Excerpt

AT&T INC. $15 is a buy. The company (New York symbol T; Income-Growth Portfolio, Utilities sector; Shares outstanding: 7.1 billion; Market cap: $106.5 billion; Dividend yield: 7.3%; Dividend Sustainability Rating: Above Average; is the largest cellphone carrier in the U.S., with 235.6 million subscribers. It also has 7.1 million traditional phone customers and 15.3 million consumer high-speed Internet users. In April 2022, AT&T merged its WarnerMedia entertainment business with Discovery Inc. to form Warner Bros. Discovery (Nasdaq symbol WBD). At that time, AT&T shareholders owned 71% of the new firm. The company also received $40.4 billion in cash as part of the deal. As a result of the spinoff, AT&T cut its annual dividend rate from $2.08 a share to $1.11. That new rate still gives you a high 7.3% yield. For 2023, those aggregate dividend payments will total about $7.9 billion, which is equal to a sustainable 48% of AT&T’s projected free cash flow (regular cash flow less capital expenditures) of $16.5 billion. AT&T is a..