Can AT&T Inc. (T) Sustain Dividend Hike?
It has emerged that AT&T Inc. (NYSE:T) is one of the best dividend paying stocks on the Dow. The company not only pays dividends consistently, but has also been hiking its dividends over the past 31 years. That explains why value investors love the stock. However, question emerges about whether the company can keep its dividend hike practice for the long haul.
Among the Dow Jones Industrial Average, AT&T Inc. (NYSE:T) has the highest dividend yield of 5.52%. Generous dividends and consistent dividend hikes are attractive attributes that make the carrier a great stock to hold. A look at revenue growth in the company, slowdown in subscriber acquisition because of intense competition and planned asset acquisitions raise concern.
For large carriers such as AT&T and Verizon Communications Inc (NYSE:VZ), the wireless sector is quickly turning red-hot. The reason is intense competition from smaller rivals such as T-Mobile US Inc (NYSE:TMUS) and Sprint Corporation (NYSE:S). Competition has meant that AT&T, for instance, not only faces a challenge in attracting big revenue growth, but also spends more money to generate revenue. The company is also enticing customers with heavy promotion offers, which eventually into to profits.
AT&T Inc. (NYSE:T) is expected to spend billions of dollars to in acquisitions, which include nearly $49 billion to buy pay-TV company, DirecTV (NASDAQ:DTV). The deal with DirecTV currently awaits regulatory approval. The company is also expected to acquire Iusacell, a Mexican wireless provider for $2.5 billion. All these acquisitions are expected to help the company expand its operations in Latin American region. However, they are obviously going to eat deep into the cash position of AT&T.
Therefore, it goes without saying that the company might hard-pressed financial to continue its generous dividends payout practice. There is no guarantee that AT&T Inc. (NYSE:T) will face financial hardship at some point because of the competition and planned acquisitions. However, there appears to be genuine reasons to be concerned about the sustainability of its dividend practice.