AT&T's Dividend Safety Improves as Leverage Drops and Cash Flow Rises

Financial Position Strengthens

AT&T (NYSE: T) has significantly improved its financial profile since cutting its dividend in 2022. The company's leverage ratio has declined from 3.0 times at the end of 2023 to 2.5 times at the end of 2025, and stood at 2.7 times in the most recent quarter. This reduction brings the company closer to its target range of 2.5 times, providing greater flexibility for capital returns.

The telecom giant's free cash flow has also grown. In 2025, AT&T generated $16.6 billion in free cash flow after capital expenditures. The company projects this figure to exceed $18 billion in 2026, rise above $19 billion in 2027, and top $21 billion by 2028. This growth supports the sustainability of its quarterly dividend payment of $2 billion.

Share Repurchases and Dividend Outlook

With a more comfortable leverage position, AT&T has resumed share repurchases, buying back $5 billion of its stock in the first half of 2026. These buybacks reduce the total number of shares outstanding, thereby lowering the aggregate dividend payout over time.

Despite the improved financials, AT&T has not increased its dividend since the 2022 cut. The current yield stands at approximately 4.3%, based on a share price of $25.89. The company's dividend history shows a stable payout since the reduction, but no growth.

What it means for income investors

AT&T's dividend appears more secure given its lower leverage and rising cash flow projections. However, the lack of dividend growth may limit its appeal for investors seeking increasing income. The company's ability to maintain its payout while investing in its business will be key to watch.

Reporting based on: The Motley Fool. Figures verified against market data where available.