Part of my income is AT&T dividends. I will keep my shares of AT&T until I drop dead. I'm not interested in capital gains. I only care about the dividends.

AT&T: Well, That Was A Surprise

Very safe dividend

Although the dividend has been hiked again and we do fully expect that the dividend will be hiked again in December 2020, it's more than covered by free cash flow. While dividend hikes have a negative impact to the payout ratio in and of itself, if free cash flow comes in at $28 billion for the year, we project the payout ratio will remain comfortably under 55% for the year. This is a massive improvement from years past. The dividend has been raised like clockwork every year and we see this as continuing. At approximately $15 billion in dividends paid out this year, divided by $28 billion in free cash flow, we see a payout ratio of around 53%-54%. This is very safe. Dividend payments will need to grow by 33% at these free cash flow levels for us to be concerned ($20 billion in payouts, which would bring the payout ratio to back over 70%). Keep in mind, we are, of course, projecting another one penny per quarter increase at the end of the year, so that would only bump payouts by about $300 million. There's a lot of wiggle room.

Final thoughts

This was mostly an in-line quarter with our expectations that we laid out. A few more video sub losses than expected, but positive expense management helped boost EPS above our expectation, while the dividend, that juicy 5.3% yield, remains incredibly safe. More debt reduction and plans for growth of the evolving company are expected in 2020. We love the name, you should own it.