While T-Mobile‘s dividend may not rival the substantial yields of competitors like Verizon and AT&T, it holds promise for dividend-focused investors.
T-Mobile has announced the initiation of a Stock Dividend Program, marking a pivotal shift in its capital return strategy
The company’s updated capital return program, slated to run through the end of the next year, is set to allocate $19 billion to shareholders. Out of this, approximately $3.75 billion is earmarked for a stock dividend program over the next five quarters, leaving $15.25 billion for share repurchases.
With nearly 1.2 billion outstanding shares, the quarterly stock dividend program of $750 million translates to roughly $0.64 per share ($2.56 annually), presenting a 1.8% dividend yield based on recent share prices. This edges out the S&P 500’s 1.6% stock dividend program yield. However, it falls short of the 7.6% yields offered by Verizon and AT&T, primarily due to their higher cash flow allocations for the stock dividend program.
T-Mobile’s dividend accounts for less than 20% of its total capital return program, with a focus on share repurchases
This strategy differs from rivals who are currently prioritizing debt reduction. Despite the lower yield, T-Mobile’s dividend has room for growth, with plans for a 10% annual increase. The initiation of the stock dividend program signals a strategic move for T-Mobile, positioning it favorably for higher total returns compared to its wireless counterparts.
The company’s robust share repurchase program, accounting for approximately 9.3% of its current market capitalization, is set to bolster the stock dividend program’s growth. This, coupled with declining outstanding shares and earnings-per-share growth, could pave the way for T-Mobile to outperform the market in the years ahead. Investors eyeing long-term gains would do well not to overlook T-Mobile’s lower initial yield, as it could yield substantial returns down the line.
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