AT&T Earnings Top Expectations. Its CFO Says Stock Dividend Is Secure.

Text size AT&T expects to pour in $24 billion in capital expenditure partly to grow 5G infrastructure. David Paul Morris/Bloomberg AT&T’s fourth-quarter earnings beat Wall Street’s estimates. A key metric for the wireless company also came in higher than expected. For AT&T (ticker: T), the driver this earnings season is free cash flow. The company reported $14.1 billion in cash flow for 2022, slightly higher than management’s prior guidance and the $13.8 billion estimate among analysts tracked by FactSet. AT&T set the 2023 forecast at $16 billion or more, matching estimates of $16.2 billion. Wall Street predictions for AT&T’s cash flow this year are down nearly 20% from the middle of last year. “We are well positioned to stand a challenging economy,” AT&T’s Chief Financial Officer Pascal Desroches told Barron’s in an interview Wednesday. AT&T investors love the stock’s dividend payouts and the free cash flow that funds it. The company currently pays $1.11 in annual dividends per share, or a 5.8% dividend yield based on Tuesday’s closing prices—far above the S&P 500’s dividend yield of 1.6%. In February 2022, the company cut its dividend by 47%, after spinning off WarnerMedia. Later, it lowered the outlook for 2022 free cash flow twice. Inflation as well as delays in collecting payments were the problem. The stock is down 4% over the past year, and missing an already lowered forecast would have further agitated investors. “The security of that dividend is very high,” Desroches said. “As a CEO or CFO, you only get to do [a dividend cut] eleven. It was the right thing to do at the time but, there isn’t going to be [any] need whatever [for another].” The stock ticked up 2.4% to $19.63 following results on Wednesday. The Dallas, Texas-headquartered company reported 61 cents in adjusted earnings on revenue of $31.3 billion for the fourth quarter, which ended in December. Analysts were looking for 57 cents on sales of $31.4 billion. Rival Verizon (VZ) matched earnings expectations on Tuesday — Barron’s prefers T-Mobile (TMUS). AT&T reported 1,104 million subscribers in total postpaid net adds in the fourth quarter, higher than estimates of 906 million. Its postpaid phone business added 656,000, slightly higher than the 644,800 expected. The average revenue per user in the postpaid phone business, was up 2.5% from a year ago. It is likely benefiting from price increases carried out for older wireless plans last year as well as the migration of users to those plans. Desroches said after last years’ normalization, he hasn’t witnessed consumers delay their mobile payments, despite the forecast for a coming recession. “Think about how critical it is for consumers to have their mobile phone services connection,” he added. Newsletter Sign-up The Barron’s Daily A morning briefing on what you need to know in the day ahead, including exclusive commentary from Barron’s and MarketWatch writers. AT&T, much like in 2022, plans to pour $24 billion into capital expenditures this year as it builds out its 5G wireless and fiber networks. Analysts predicted $22.1 billion. That shouldn’t scare investors too much. Desroches set up the expectation of peak investment in 2022 and 2023 several times last year and expects capital investment to begin tapering to around $20 billion next year. To be sure, higher capital investments cut into free cash flow and investors expect companies to save cash in the current weak economic environment, but AT&T should be all right, as telecom companies are typically more resilient during economic downturns. Write to Karishma Vanjani at

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