According to This Critical Number, AT&T's 4%-Yielding Dividend is Now on Rock-Solid Ground

Core Viewpoint - AT&T has successfully reached its target leverage ratio, allowing the company to return more cash to investors through share repurchases while maintaining a stable dividend yield of over 4% [2][9]. Group 1: Financial Performance - AT&T cut its dividend by nearly 50% in 2022 to focus on debt reduction and reinvestment in fiber and 5G networks [1]. - The company generated $3.1 billion in free cash flow in the first quarter, exceeding its$2.1 billion dividend payout, and achieved a net debt reduction of 9.6 billion over the past year [4]. - AT&T expects to generate at least 16 billion in free cash flow this year, which will cover its annual dividend outlay of over 8 billion [6]. Group 2: Capital Allocation Strategy - The company has been following a capital allocation strategy that prioritizes investment in 5G and fiber networks while maintaining its dividend [3]. - AT&T plans to repurchase up to 20 billion of its stock over the next several years, enhancing shareholder returns [5]. - The anticipated dividend payments over the next three years are expected to be around 20 billion, with a declining dividend payout ratio due to share repurchases [7]. Group 3: Future Outlook - With the leverage target achieved, AT&T will have additional borrowing capacity and an estimated financial capacity of over 50 billion over the next three years [8]. - The company could utilize this financial flexibility for opportunistic stock buybacks or accretive acquisitions, further enhancing the sustainability of its dividend [8].