U.S. telecom giant, AT&T Inc. (T - Analyst Report) has a new repurchase program of up to 300 million shares. The program comes with no expiry date and is an addition to the two previous buyback programs of 3 million shares each issued in 2010 and 2012. In addition, the company announced a quarterly dividend payment of 45 cents per share payable on May 1, to stockholders of record on Apr 10.
We believe AT&T increased share repurchase program and regular dividend payments bear testimony to its commitment towards increasing shareholder value. Last November, AT&T boosted its dividend by 2.3% to 45 cents ($1.80 per share on an annualized basis), marking the 29th consecutive dividend hike.
In terms of buybacks, the company bought back 371 million shares for $12.8 billion as of Dec 31, 2012. Overall, in 2012, the company returned approximately $23 billion to its shareholders in the form of share repurchase and dividend payments.
We believe these synergies stem from the company’s balance sheet strength as well as business growth arising from the current momentum in its wireless business. AT&T maintains a solid balance sheet in the telecom industry with net debt-to-adjusted EBITDA ratio of 1.58 times at the end of 2012.
Going forward, the company will also focused on improving its top line by investing in infrastructure development projects. Continued strength in smartphone and branded computing device sales are fueling growth in AT&T’s business.
In addition, the company boasts the best Internet speeds in the industry as it is the only U.S. carrier that provides 4G networks through both Long Term Evolution (LTE) and High-Speed Packet Access Plus (HSPA+) technologies. AT&T’s LTE network serves as the benchmark of mobile technology and is the life-blood for operators across the world.
However, constant access line losses, competitive threats, heavy subsidies on Apple Inc. (AAPL - Analyst Report) iPhone and high-end Google Android-based smartphones as well as federal regulations could hold back the company performance over the near term.
AT&T, which operates with major wireless carriers like Verizon Communication Inc. (VZ - Analyst Report) has a Zacks Rank #2 (Buy).