AT&T Boosts Share Repurchase

AT&T Inc. ( T - Analyst Report ) , the second largest U.S. mobile service provider, increased its share repurchase authorization plan by 300 million additional shares. The buyback represents nearly 5% of the company’s outstanding shares and does not have any expiration date.

This increase will be in addition to the 300 million share buyback plan announced in December 2010. As of June 2012, AT&T repurchased 143.5 million of shares for $4.6 billion and had 156.5 million shares remaining in its previous buyback authorization.

The move reflects the company’s strong commitment to deliver increased returns to its shareholders through attractive dividends and share repurchases. AT&T holds the top position in returning value to shareholders, ahead of its major rivals Verizon Communications Inc. ( VZ - Analyst Report ) and Sprint Nextel Corp. ( S - Analyst Report ) .

AT&T returned approximately $10 billion to its shareholders in the first half of the year including dividends and share buybacks. Last December, AT&T boosted its annual dividend by 2.3% to $1.76 per share, marking the 28th consecutive year of dividend hike. The increasing shareholder returns reveal AT&T’s solid financial position, with a healthy balance sheet and growing free cash flows.

The plan came within a week of the second quarter earnings announcement. AT&T once again delivered an outstanding performance in the quarter with double-digit earnings and operating income growth boosted by a strong wireless segment with record low churn rates and best-ever margins. The company exited the second quarter with net debt-to-adjusted EBITDA ratio of 1.42 times, down from 1.48 times at the end of last quarter.

We are currently maintaining our long-term Neutral recommendation on AT&T. The stock retains a Zacks #3 (Hold) Rank for the short term (1–3 months).