AT&T No Dividend Increase In December: What’s Happening?

Dividend Growth Perspective

At first glance, T’s dividend profile looks very good. High yield with consistent increases sounds perfect. However, looking at the dividend growth rate, things are by no means perfect. Over the past decade, T’s annualized dividend growth rate is 2.21%. Over the past 5 years, it goes down to 2.12%. T didn’t increase its dividend in 2020 which is a source of concern. We expect the company to pay down debt and invest in HBO streaming services. If this is their plan moving forward, we can forgive a dividend growth pause for a year or two.

Is the Dividend Safe?

If they look at the payout ratio, dividend investors will start to run (around 135%)! However, with T’s growth by acquisition model, it is only normal. In this case, the cash payout ratio tells a lot more and looks healthy at 53%. Cash Flow is also very strong with a CFFO of 45B$ and debt is slowly going down. I pushed my analysis further in the video right below. Still, you can consider the dividend safe.

Final Thoughts

Funny enough, I used to hate AT&T because of its low returns, higher debts, and risks. I still don’t hold the stock, but there are many positive things about the company, including the fact that it’s a cash machine as a dominant player in the wireless industry.

The telecom must increase its dividend in 2021 to keep its Dividend Aristocrat title. A dividend cut would be catastrophic. Management would have to have serious problems to go down that path. Considering AT&T’s metrics and business model, I highly doubt this would happen. You can sleep well; I’m confident AT&T will increase its dividend next December.
I even included T in my yearly top picks for the first time since 2012!

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