AT&T’s Smaller Dividend Now Rests on Stronger Foundations

AT&T (NYSE:T | T Price Prediction) will pay its next $0.2775 quarterly dividend on November 2, 2026. That works out to $1.11 a year and a 4.53% yield. Its dividend has stayed flat since the April 13, 2022 ex-dividend date, when it dropped from $0.52. It has not been raised since. The cut came the same month AT&T spun WarnerMedia off and merged it with Discovery. So the company writing checks today is a different business, with different cash sources supporting the dividend.

Smaller Check, Wider Cushion

In 2021, dividends of $15.068 billion took about 59% of operating cash flow left after capex. In 2025, AT&T paid $8.18 billion, roughly 49% of its $16.586 billion in free cash flow. In Q2 2026, the $1.976 billion dividend used about 42% of the $4.67 billion in free cash flow.

Wireless and Fiber Now Carry the Load

The Advanced Connectivity segment brings in over 90% of service revenue and nearly all adjusted EBITDA. Last quarter AT&T added 432,000 postpaid phone subscribers, with churn at 0.86%. It also added 367,000 fiber customers, and 42.5% of its home internet customers now buy AT&T wireless as well. Management explained the logic on the earnings call:

“Our goal is not to maximize our crew of individual products, but instead to maximize total advanced connectivity service revenues in order to drive attractive returns on our investments in 5G and fiber.”

The old copper business is contracting quickly. Legacy service revenue fell 26%.

What Gets Paid Before Shareholders Do

Several bills come first. Capital spending is guided to $23 billion to $24 billion this year. Total debt stands at $144 billion, and interest expense rose 13.8%. Net leverage (net debt divided by adjusted EBITDA) is 2.68x, and management expects it to climb to about 3.2x after the EchoStar (NASDAQ:SATS) spectrum deal. Dividends plus buybacks will total about $18 billion in 2026, which management called “essentially 100%” of its free cash flow outlook. CEO John Stankey explained why buybacks got a bigger share:

“I probably have a bias that says I’d like to buy more of it back because I think it’s incredibly undervalued.”

How Verizon and T-Mobile Price the Same Business

Verizon Communications (NYSE:VZ) pays out more, at a 6.09% yield, but its quarterly revenue slid 0.7%. T-Mobile US (NASDAQ:TMUS) is the growth option. Its yield is just 2.5%, revenue grew 7.9%, and the stock trades at a forward P/E of 12. AT&T sits between the two, with 2.3% revenue growth and a forward P/E of about 10.

Answer for Investors Who Took the Cut

The $1.11 dividend is on stronger ground than the old $0.52 quarterly payout was. Coverage is wider, and the cash comes from subscription connectivity rather than debt-funded media assets. Management has committed to holding the payout steady through 2028, with free cash flow guidance of $19 billion+ in 2027 and $21 billion+ in 2028. Buybacks are the shock buffer: they can be scaled back before the dividend is cut. The stock is down 7.78% over the past year, which shows investors want to see the growth delivered first.

One risk could undo this view. If free cash flow growth stalls just as Legacy EBITDA turns negative after 2027, leverage could stay near 3.2x instead of returning to the 2.5x target. That would leave the dividend competing with debt repayment for the same cash. The fourth quarter’s expected free cash flow recovery is the next checkpoint.

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