AT&T's Dividend Is Safe Despite Falling Earnings -- Here's Why
AT&T (NYSE: T) just released its second-quarter earnings. Not surprisingly, COVID-19 contributed to a drop in adjusted earnings of nearly 7% from year-ago levels. The news that the company has also lit up 5G service nationwide may obscure any bad news coming from the pandemic or the quarterly report.
However, if one looks closely at the earnings report, they may notice that net income has not kept up with dividend payments over the last six months. Fortunately for AT&T investors, the company has addressed this problem, and income investors should not worry about the dividend.
For the previous six months, AT&T has reported a net income of $6.526 billion. That is down significantly from the $8.322 billion earned in the first six months of 2019. Unfortunately for the company, the dividend expense for the first six months of 2020 amounted to $7.474 billion, nearly $1 billion more than the net income so far this year. This takes the dividend payout ratio, or the percentage of net income going to the dividend, to well over 100%.
Source Fool.com
