Today saw a surge in AT&T's stock price.
AT&T's stock saw a 4% surge before 11:05 a.m. ET on Tuesday, following its announcement of a strategic plan to drive growth and enhance shareholder returns through 2027. This ambitious plan includes some notable developments:
- The telecom giant aims to build the nation's largest fiber broadband network, providing service to over 50 million customers.
- Shareholders can expect a hefty return via $40 billion in dividend payments and share repurchases within the next three years. This will be kickstarted with a $10 billion share buyback by the end of 2026.
The Game Plan Unveiled
AT&T is embracing a dual strategy to foster growth: 5G wireless communications and fiber broadband fixed-line. The company is banking on these cutting-edge technologies, boasting "superfast download speeds and serving as a platform for new product and GenAI innovation." Essentially, this transformation paves the way for AT&T to transcend the traditional communications sector and morph into an artificial intelligence (AI) stock.
Financially, AT&T targets annual wireless revenue growth between 2% and 3%, with a leaner fiber business exhibiting mid-teens growth. The combined revenue growth should hover around the low single-digits. Profits should follow a similar trajectory, with an estimated 3%+ annual EBITDA growth across the three years. Free cash flow will see a 4% annual boost, rising from $16 billion in 2025 to $18 billion or more by 2027.
Is AT&T Stock Worth Investing in?
AT&T's ambitious plan projects generating a whopping $51 billion in total cash profits over the period—$17 billion per year. This considerable sum should cover the $40 billion allocated for dividends and share repurchases. The proposed annual free cash flow of $17 billion on a $163 billion stock valuation results in a price-to-free cash flow ratio under 10x. This, in turn, appeals to value investors.
To sweeten the pot, the dividend yield clocks in at 4.9%, while the growth rate sits at a robust 4%. Considering these factors, AT&T stock appears to be a tantalizing prospect.
Investors interested in finance and seeking potential investing opportunities might find AT&T's stock appealing due to its projected dividends. The telecom giant plans to return a significant $40 billion to shareholders through dividend payments and share repurchases within the next three years.
Following AT&T's ambitious plan, financial analysts might suggest that the company's strong focus on investing in its 5G wireless communications and fiber broadband fixed-line could provide solid returns for investors who are willing to allocate their money to this sector.
