AT&T May Authorize Stock Buyback, Raise Dividend

AT&T Inc., the largest U.S. phone company, will probably boost its dividend and announce a share- buyback plan tomorrow as customer gains and demand for wireless data services help its cash flow, analysts’ estimates show.

AT&T may raise its quarterly dividend to 43 cents from 42 cents, said Credit Suisse Group AG’s Jonathan Chaplin and Piper Jaffray & Co.’s Chris Larsen, echoing estimates based on data compiled by Bloomberg. The new payout would represent a 6.5 percent yield on the carrier’s average stock price this year.

Chief Executive Officer Randall Stephenson has attracted 6.1 million wireless customers this year with devices such as Apple Inc.’s iPhone, while reducing the average rate at which users leave. Last quarter, the carrier increased revenue by $847 million from a year earlier to $31.6 billion.

“AT&T has free cash to spend and one thing you can certainly do to cause investor returns is to repurchase shares,” New York-based Chaplin, who rates AT&T shares “outperform,” said in an interview. “AT&T has the ability to do it.”

The Dallas-based carrier’s board is likely to authorize a repurchase of as much as $12 billion, Chaplin said. New York- based Larsen said the repurchase is probably $8 billion to $10 billion, or 300 million to 400 million shares.

Photographer: Tim Boyle/Bloomberg

Randall Stephenson, chairman, president and chief executive officer of AT&T Inc. Close

Randall Stephenson, chairman, president and chief executive officer of AT&T Inc.

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Photographer: Tim Boyle/Bloomberg

Randall Stephenson, chairman, president and chief executive officer of AT&T Inc.

“After fully investing in its business, the company still has excess cash flow,” Larsen, who rates the stock “overweight,” said in a Dec. 7 note to clients.

McCall Butler, a spokeswoman for AT&T, declined to comment.

Throwing Off Cash

AT&T last authorized a repurchase in December 2007, setting out to buy back about 400 million shares by the end of 2009. It bought 164.2 million shares in 2008 for $6.1 billion and 133,000 in 2009 for about $3 million, according to company statements.

AT&T generated $11.6 billion of free cash flow in the first three quarters, down 16 percent from a year earlier.

“The business continues to throw off cash,” Chief Financial Officer Rick Lindner said in a Dec. 7 interview in New York. “That gives us flexibility to use excess cash, rather than pay down debt, for other things and share repurchase is something we’d certainly consider.”

AT&T rose 10 cents to $29.23 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have added 4.3 percent this year.

The company is upgrading its so-called third-generation wireless network and testing a fourth-generation network it expects to introduce by mid-2011, boosting capital expenditures by 18 percent to $13.7 billion this year through September.

The Bloomberg dividend data is based on seven criteria including a company’s guidance, dividend history and regression analysis.

“We have always believed strongly in the dividend,” Lindner said. “It’s normal for us in our business to provide a good portion of our return via our dividend.”

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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