AT&T Just Secured $5.5 Billion in New Debt: What It Means For Its Dividend

AT&T (NYSE: T) just received approval for a $5.5 billion loan. The telecom giant has seen its stock price fall roughly 23% since the start of the year as coronavirus-related fear led investors to sell. It dropped, in part, because the company suspended its stock buyback amid the sell-off. AT&T also announced a plan to lay off workers and scale back operations.

These decisions (along with the $5.5 billion capital infusion) increase the company's flexibility in the current economic uncertainty created by the coronavirus pandemic. A significant question now for investors is how the additional cash will affect the telecom's ability to maintain its dividend.

Next to ExxonMobil, AT&T pays the highest dividend yield among Dividend Aristocrats. For 2020, the annual payout for this tech stock is running at $2.08 per share. This amounts to a dividend yield of approximately 7% at current prices. At first glance, the payout appears expensive but sustainable for the company. With a payout ratio of about 59.1%, a majority of profits go to the dividend. Still, that leaves a significant amount of cash free for other purposes.

Source Fool.com