Back to top

Analyst Blog

Zacks Equity Research

AT&T Raises Dividend by a Penny


Trades from $3

Leading telecom carrier, AT&T Inc. (T - Analyst Report) has raised its dividend by a cent from 45 cents paid previously. The growth marks a 2.2% increase in the company’s quarterly dividend payment. On an annualized basis, the dividend payment amounts to $1.84, up from $1.80.

The increased dividend is payable on Feb 3, 2014 to common stockholders of record on Jan 10, 2014. We believe that the recent dividend hike would strengthen investor confidence in the company’s financials and therefore improve its market position.

The company has the strongest balance sheet in the industry with net debt-to-adjusted EBITDA ratio of 1.76 times at the end of the third quarter 2013. It offers flexibility to invest in the business through both capital improvement and strategic acquisition, while returning substantial value to shareholders through attractive dividends and share repurchases.

In 2012, AT&T doubled its share repurchase authorization plan to 600 million shares. The company completed the initial 300 million-share buyback program last year. As of Sep 30, 2013, the company repurchased 55 million shares for $1.9 billion. At the end of the quarter, 216 million shares remained in the current authorization. Moreover, in Nov 2012, AT&T boosted its annual dividend by 2.3% to $1.80 per share, marking the 29th consecutive year of dividend hike.

During the reported quarter, the company returned approximately $2.4 billion to its shareholders through dividend payments. Overall, the company has spent nearly $18 million as shareholder returns until third quarter 2013.

We believe the company’s focus on building shareholder value will continue to grow as it expects strong operating results this year.

For 2013, AT&T expects revenue growth aided by contributions from wireless services. Wireless data services, which represent $22 billion in annualized revenues and are growing at a rate of approximately 18% per annum is a key driver.  AT&T’s wireless business, in particular the post-paid segment, is benefiting from promotional strategies that it had undertaken.

AT&T, which operates with other carriers like Verizon Communications Inc. (VZ - Analyst Report) , Sprint Corporation (S - Analyst Report) and T-Mobile US, Inc. (TMUS - Analyst Report) , has a Zacks Rank #3 (Hold).