AT&T Inc. no longer seems the most unloved name in wireless, and that manifested in one milestone that occurred last week.
While AT&T shares
rallied in the wake of the company’s Thursday morning earnings report, which showed continued subscriber gains, Verizon
shares floundered as the wireless rival posted its third straight quarter of subscriber declines Friday morning. Amid the price activity Thursday, AT&T’s dividend yield fell below Verizon’s for the first time since March 6, 2020.
A rising dividend yield isn’t always a good sign, as it can signal more negative investor sentiment as the stock’s price comes down. On the flip side, in AT&T’s case, the falling yield comes as Wall Street increasingly warms to the company’s execution and prospects.
AT&T’s dividend yield was as high as 7.81% on Oct. 12, but the stock yielded 6.12% as of Wednesday as the stock rose 24% over that span. Verizon currently yields 7.14%.
Morgan Stanley analyst Simon Flannery, who highlighted in a Wednesday note to clients that AT&T’s 17% outperformance last week brought its dividend yield “inside VZ’s for the first time in several years,” wrote that AT&T’s latest earnings “looked even cleaner” in light of Verizon’s more mixed results.
“We view AT&T’s results as good enough for now as they should provide enough comfort for investors looking for a relatively defensive name into year-end, while shares should also have support from a dividend yield that remains >6%,” Flannery continued.
AT&T’s dividend—and its ability to support it—are of strong interest to investors, and the company sought to reassure investors about its positioning after recording $3.8 billion in free-cash flow from continuing operations during the third quarter.
“We hope this healthy free-cash flow for the quarter gives you confidence in our ability to achieve our target for free-cash flow in the $14 billion range for the year, a level that is more than ample to support our $8 billion dividend commitment,” Chief Executive John Stankey said on the company’s earnings call.
Verizon’s earnings call also contained mention of dividend commitments, as Chief Financial Officer Matt Ellis noted that the company recently increased its dividend for the 16th consecutive year.
“We recognize the importance of the dividend to our shareholders, and we intend to continue to put the board in a position to approve annual increases,” he said.
Tomi Kilgore contributed to this article.