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AT&T stock regains momentum, but dividend payout is a big concern

AT&T stock regains momentum, but dividend payout is a big concern
Justinas
Baltrusaitis
Updated: 05 Dec, 2020
2 mins read

AT&T stock (NYSE: T) price has been under pressure since the beginning of this year as a communication company continues facing intense competition. Meanwhile, the company says their investments in network quality have helped in improving results from wireless businesses.

Although AT&T stock price regained some momentum after third-quarter results, the shares of communication company are still down almost 23% in the past twelve months. The steep share price selloff has pushed its dividend yield above 7.3%.

T AT&T Inc. daily Stock Chart
AT&T stock performance. Finviz chart

However, the robust increase in dividend payout ratio has put pressure on its cash flows. The dividend payout ratio based on free cash flows reached 55% in the latest quarter.

The revenue decline is putting pressure on dividends

The year over year drop in revenue is a big cause of concern for investors. Its September quarter revenue fell 5% from the past year period. The revenue selloff is driven by lower revenue from all three segments: Entertainment, Mobility, and WarnerMedia.

Its average revenue growth in the past three years stood around only 2%. Despite cost-cuttings, the earnings of wireless communication company fell 32% in the trailing twelve months. The company has generated adjusted earnings per share of $0.76 compared to $0.94 per share in the year-ago period.

The company expects to generate $26 billion in free cash flows this year while dividend payments are likely to account for $14.5 billion, representing 55% of free cash flows.

HBO and HBO Max are the bright spots

AT&T stock regained some momentum in the past month amid stronger than expected HBO and HBO Max subscribers. Its domestic HBO subscribers came in at 38 million in the September quarter, beating the year-end target of 36 million subscribers.

Moreover, HBO Max subscribers stood around 57 million in the latest quarter, double from the 37 million in the June quarter.

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Justinas Baltrusaitis
Author

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.