AT&T Relies on Share Buybacks to Increase Shareholder Value

The American telecommunications giant AT&T recently unveiled its updated strategic plan, providing investors with a forecast through 2027. The company anticipates a steady increase in free cash flow during this period, which it aims to primarily return to shareholders. However, contrary to previous approaches, AT&T will not be raising its dividend, which currently yields nearly 5%. Instead, the company plans to conduct massive buybacks of its own shares. In recent years, AT&T has fundamentally overhauled its business model and balance sheet. Non-core assets, such as the media division and the stake in DIRECTV, were divested. The resulting cash flow was used to invest in the expansion of mobile and broadband businesses. Excess funds after dividends were allocated to debt reduction. This realignment is yielding results. AT&T expects revenue growth in the low single-digit range over the next three years. Adjusted EBITDA is also expected to increase by 3% or more annually, favored by cost savings of over 3 billion USD by 2027. This positions the company to generate strong and sustained cash flow. From 2025 to 2027, AT&T plans to invest around 22 billion USD annually. Free cash flow is expected to exceed 16 billion USD next year and then rise by more than 1 billion USD annually, surpassing the 18 billion USD mark by 2027. AT&T is also on track to achieve a targeted debt ratio of 2.5 in the first half of next year and maintain it through 2027. Overall, the company anticipates financial capacity of approximately 50 billion USD over the next three years. This consists of growing free cash flow, an expected cash inflow from the sale of the 70% stake in DIRECTV valued at 5.4 billion USD by mid-2025, and financial flexibility due to adhering to the debt target. More than 40 billion USD of these funds are to be returned to investors by 2027. In this process, the dividend will be maintained at the current level of 1.11 USD per share, which alone will channel over 20 billion USD into shareholders' pockets.