Published Wed, 12 Jun 2019 07:15:03 -0400 on Seeking Alpha
Image Source: AT&T Inc – IR Presentation
By Callum Turcan
Telecommunications, entertainment and media giant AT&T (T) is a free cash flow cow heavily burdened by a large net debt load, a product of past acquisition activity. As a free cash flow cow, AT&T has been able to steadily increase its dividend over the past three consecutive decades and shares yield 6.4% as of this writing. We like AT&T’s ability to generate a lot of net operating cash flow and respect its ongoing deleveraging efforts, but caution that the company won’t be able to pursue meaningful payout increases until its net debt load comes down further. Divestments are helping AT&T reach its leverage targets.
Monitoring Free Cash Flow and Net Debt
AT&T’s net operating cash flow came in at $38.4 billion, $38.0 billion, and $43.6 billion in 2016, 2017, and 2018, respectively, while its capital expenditures were $22.4 billion, $21.6 billion, and $21.3 billion during this period. This enabled free cash flows (defined as net operating cash flow less capital expenditures) of $16.0 billion in 2016, $16.5 billion in 2017, and $22.4 billion in 2018. We appreciate AT&T’s strong and consistent free cash flow, which easily covered $13.4 billion in dividend payments and $0.6 billion in share buybacks last year.
Last year, AT&T issued ~1.2 billion shares and paid ~$42.5 billion in cash to take over Time Warner in a deal that closed in June 2018. That’s on top of the net... Read more
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