AT&T (NYSE: T) has amassed $180 billion in debt and the market cap is only $219 billion. This has many investors wondering, is AT&T’s dividend safe? Well, my short answer is yes… buying shares at current levels is a good risk-to-reward opportunity. AT&T’s steady stream of big dividends is hard to pass up…
AT&T Dividend per Share Over the Last 10 Years
AT&T paid investors $1.61 per share a decade ago. Since, the dividend has steadily climbed to $2. That’s a 22% increase and you can see the annual changes below…
AT&T recently announced that an increase of its quarterly dividend by another 2%. This dividend growth isn’t big but it’s keeping pace with inflation. The more enticing reason to invest is that shares have dropped 23% this year. As a result, the yield is climbing…
AT&T Dividend Yield Nears 7%
AT&T’s long history of paying dividends makes it the yield a great indicator of value. A higher yield is generally better for buyers. The dividend yield comes in at 6.79% and the chart below shows the dividend yield over the last 10 years…
With the 10-year treasury rate below 3%, AT&T seems like a steal. Although, we must first determine if AT&T’s dividend is safe…
Improved AT&T Dividend Safety Check
The elephant in the room with AT&T is the massive debt pile. Although, AT&T forecasts generating $26 billion in free cash flow next year. The company also expects to use about $12 billion in free cash flow after dividends to pay down debt in 2019. AT&T has spaced out its debt repayment schedule.
I don’t foresee any repayment issues and AT&T has the ability to sell off non-core assets and access revolving credit.
Here’s AT&T’s payout ratio based on free cash flow over the last 10 years…
Factoring in debt repayment, AT&T’s dividend still looks safe. The beaten down shares have pushed the yield up and value investors are taking note.
If you’re interested in seeing more dividend research, please comment below. You can also check out our free DRIP calculator. With it, you can uncover the power of dividend reinvestment growth.
Good investing,
Robert
