AT&T Just Raised Its Free-Cash-Flow Guidance. Here's Why It Should Still Suspend Its Dividend.

AT (NYSE: T) may finally have begun a long-awaited rebound. The stock surged 7% higher following its earnings announcement for the third quarter of 2023. A possible reason for the increase may have involved its guidance for free cash flow, which rose from $16 billion to $16.5 billion for 2023.

Unfortunately for income investors, the higher free cash flow may not significantly improve its ability to pay a dividend. Hence, rather than keeping the payout, AT has good reason to eliminate it despite more robust free cash flows. Here's why.

Although AT's dividend cut last year seemed devastating, shareholders still received a generous payout. Currently, they receive $1.11 per share in dividend payments annually. Even after the post-earnings surge in the stock, the dividend yield stands at almost 7.3%, approximately 4.5 times the average S 500 yield of 1.6%.

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Source Fool.com