AT&T Stock Is Falling, But Its Dividend Yield Is Getting Even Bigger
AT&T stock is shedding value on Thursday, after a big miss on second-quarter free cash flow and lowered guidance for the remainder of the year. That overshadowed strong subscriber gains and operational performance in the period.
That stock-price decline is lifting AT&T shares’ (ticker: T) annual dividend yield.
The telecommunications giant has long been a favorite among income investors, with a juicy yield and stable cash flows backed by recurring revenue from subscriptions and high barriers to entry in the asset-intensive industry. This year brought a dividend cut when AT&T spun off WarnerMedia, as the company doubled down on investing in its 5G and fiber networks.
AT&T’s current dividend commitment is for around $8 billion annually, or $2 billion a quarter. The company generated $1.4 billion in free cash flow in the second quarter reported on Thursday, far short of the $4.7 billion that analysts were expecting. It also means AT&T’s free cash flow for the quarter didn’t cover its dividend commitment in the period—not what income investors like to see.
Management lowered its 2022 free cash flow guidance to $14 billion, from $16 billion, on Thursday. That would lift AT&T’s dividend payout ratio to about 57% in 2022. The company continues to expect $20 billion in free cash flow in 2023, for a healthier dividend payout ratio of 40%.
The $8 billion in annual dividend payments translates to $1.11 per share annually. At AT&T stock’s roughly $18.60 on Thursday morning, down 9%, that’s an annual dividend yield of 6%. It compares with rival Verizon Communications
‘ (VZ) dividend yield of 5.4%, and the S&P 500 ’s 1.5%.
It puts AT&T among the top handful of dividend payers in the index. First on the list is fellow telecom company Lumen Technologies (LUMN), with a 9.6% annual yield, followed by tobacco giant Altria Group (MO), whose stock yields 8.5%. Next up are a pair of real estate stocks, Vornado Realty Trust (VNO) and Simon Property Group (SPG), yielding 7.3% and 6.6%, respectively.
AT&T ranks seventh in the S&P 500, followed by Verizon at ninth. Three companies are tied for tenth-highest yield in the index, each with 5.3% annual dividend yields.
Here’s the full list:
The S&P 500’s Top Yields
Company / Ticker | Recent Price | Annual Dividend Per Share | Annual Dividend Yield |
---|---|---|---|
Lumen Technologies / LUMN | $10.39 | $1.00 | 9.6% |
Altria Group / MO | $42.42 | $3.60 | 8.5% |
Vornado Realty Trust / VNO | $29.11 | $2.12 | 7.3% |
Simon Property Group / SPG | $103.45 | $6.80 | 6.6% |
Oneok / OKE | $57.63 | $3.74 | 6.5% |
Kinder Morgan / KMI | $17.55 | $1.11 | 6.3% |
AT&T / T | $18.60 | $1.11 | 6.0% |
Dow / DOW | $50.94 | $2.80 | 5.5% |
Verizon Communications / VZ | $47.79 | $2.56 | 5.4% |
Phillip Morris International / PM | $94.55 | $5.00 | 5.3% |
Williams Cos / WMB | $32.03 | $1.70 | 5.3% |
IBM / IBM | $125.48 | $6.60 | 5.3% |
Source: FactSet