Assessing the Sustainability and Growth of AT&T Inc's Dividends
AT&T Inc (T, Financial) recently announced a dividend of $0.28 per share, payable on 2024-02-01, with the ex-dividend date set for 2024-01-09. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into AT&T Inc's dividend performance and assess its sustainability.
What Does AT&T Inc Do?
The wireless business contributes about two thirds of AT&T's revenue following the spinoff of Warner Media. The firm is the third-largest U.S. wireless carrier, connecting 70 million postpaid and 18 million prepaid phone customers. Fixed-line enterprise services, which account for about 18% of revenue, include internet access, private networking, security, voice, and wholesale network capacity. Residential fixed-line services, about 11% of revenue, primarily consist of broadband internet access service. AT&T also has a sizable presence in Mexico, serving 22 million customers, but this business only accounts for 3% of revenue. The firm still holds a 70% equity stake in satellite television provider DirecTV but does not consolidate this business in its financial statements.
A Glimpse at AT&T Inc's Dividend History
AT&T Inc has maintained a consistent dividend payment record since 1985. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down AT&T Inc's Dividend Yield and Growth
As of today, AT&T Inc currently has a 12-month trailing dividend yield of 6.35% and a 12-month forward dividend yield of 6.35%. This suggests an expectation of same dividend payments over the next 12 months.
Over the past three years, AT&T Inc's annual dividend growth rate was -18.50%. Extended to a five-year horizon, this rate increased to -7.60% per year. And over the past decade, AT&T Inc's annual dividends per share growth rate stands at -1.10%.
Based on AT&T Inc's dividend yield and five-year growth rate, the 5-year yield on cost of AT&T Inc stock as of today is approximately 4.28%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, AT&T Inc's dividend payout ratio is not applicable.
AT&T Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks AT&T Inc's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported net profit in 8 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. AT&T Inc's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and AT&T Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. However, AT&T Inc's revenue has decreased by approximately -13.60% per year on average, a rate that underperforms approximately 89.28% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, AT&T Inc's earnings decreased by approximately -4.90% per year on average, a rate that underperforms approximately 65.7% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -14.90%, which underperforms approximately 91.43% of global competitors.
Next Steps
Considering AT&T Inc's long-standing history of dividend payments and its current yield, the company remains an attractive option for income-focused investors. However, the negative dividend growth rate and challenging growth metrics may raise concerns about the long-term sustainability of these payments. Investors should weigh the high yield against the potential for stagnant or declining dividend growth, as well as the company's ability to reverse the negative trends in revenue and earnings. For those seeking to diversify their portfolio with high-dividend yield stocks, GuruFocus Premium users can use the High Dividend Yield Screener to find other promising candidates.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
