AT&T Inc. is buying back its own stock again, which shows that the company is making progress in paying down its debt.
The phone company used to take on a lot of debt to make expensive deals in the media world. Over the past few years, it has worked to lower its debt as it has stopped pursuing those deals and returned its attention to core connections. AT&T T 3.26%, which already pays a big dividend, is raising the amount of cash it wants to give back to owners.
AT&T wants to spend at least $40 billion in cash on payouts and share buybacks over the next three years. The share buybacks are a new part of the plan. During that time, the company plans to pay out at least $20 billion in dividends and use the other $20 billion for share buybacks, it said Tuesday before its investor day.
To give you an idea, the company has paid out about $8 billion a year in dividends over the last three years, adding up to about $24 billion, but it hasn’t bought back any of its own shares. AT&T said in a press release that it plans to keep its yearly dividend of $1.11 per share. It’s possible that the company will need less cash to pay its dividends than in the past because it will be buying back its own shares.
According to Chief Financial Officer Pascal Desroches, the company will continue to grow and invest at the top of its field. “We’re also going to add to our very attractive dividend with stock buybacks,” he told BourseWatch.
If AT&T meets its goal for net leverage—that is, a ratio of about 2.5 times based on net debt to adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda)—the company will start buying back its own stock. The first $10 billion worth of shares will be bought back right away.
The company plans to finish that round of buybacks by the end of 2026. If it gets board approval, it will then buy back another $10 billion worth of shares in 2027.
AT&T’s move is a big deal because its shares have an implied yield of 4.89%, which makes them very appealing to income buyers. Since the first quarter of 2020, the business hasn’t bought back any stock.
AT&T could see its total capital returns reach almost 80% of its total cash flow over the next three years. This is because the company will need to spend less of its cash on paying down debt. In the past few years, the company has focused on paying down debt and only putting about 45% of its cash flow toward capital returns. This has helped improve its balance sheet.
Along with its investor day, AT&T also announced new financial goals. From 2025 to 2027, the company thinks that combined service revenue will grow at a low-single-digit rate each year. Mobility service revenue growth could be between 2% and 3% each year.
Kutgun Maral, an analyst at Evercore ISI, said that the mobility estimate was a pleasant surprise because most people thought that growth would slow down to 1.5% in 2027.
AT&T also thinks that the income from its consumer fiber broadband business will grow at a rate in the mid-teens per year.
Fiber has been a big deal for AT&T as it has changed its business focus to focus on core telecoms. The company now wants to have 50 million or more fiber spots by 2029, up from about 29 million by the end of this year.
Desroches said that some buyers might not fully understand AT&T’s role in the business market, especially when it comes to fiber. “Because we know that the need for connectivity is going to grow a lot, being able to serve businesses with fiber is also going to give them a long-term advantage,” he said.
He said that AT&T hasn’t yet fully penetrated small and medium-sized businesses with fiber services, but that the company sees “real opportunity to drive incremental growth.”
Ebitda is another measure that AT&T investors pay close attention to. The company plans for adjusted Ebitda to grow by at least 3% each year from 2025 to 2027. AT&T wants to have at least $16 billion in free cash flow in 2025, not counting the money it gets from DirecTV. Over the next three years, the company wants to grow by $1 billion each year.
According to Citi Research analyst Michael Rollins, AT&T wants to show “favorable annual financial growth relative to our current base expectations,” speed up the rate of fiber passings over the next four years both within its own footprint and through outside open-access relationships, such as Gigapower, and balance investment with shareholder returns with a $20 billion buyback over three years. This is more than the $10 billion to $20 billion range that we had originally expected.
