Chris Lange
6 min read
Quick Read
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AT&T’s leverage jumped to 3x EBITDA after a $23 billion spectrum purchase, while EPR faces a $450 million December maturity and heavy theater exposure.
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Altria’s liabilities exceed its assets and cigarette volumes keep shrinking, while Verizon carries $166 billion of debt despite strong free cash flow covering its dividend.
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Most of these high yielders raised guidance, but leverage, tenant concentration and thin balance sheets hide the real threats to their payouts.
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A high yield matters only if the company can keep paying it. AT&T (NYSE:T) shares have fallen 10.5% over the past month, so its yield rose because the price fell. Most of the six names below raised guidance in their latest quarterly reports. Their warning signs sit deeper, in leverage, tenant concentration, shrinking volumes, and thin balance sheets.
Quick test: a dividend is sustainable when the right earnings base covers it (AFFO or FFO for REITs, EPS for ordinary companies), when free cash flow pays for it after capital spending, and when the company isn’t taking on more debt to keep the checks going out. (We put the full checklist of warning signs that a big yield is about to be cut in a free report here.)
AT&T (T): Leverage Jumps as the Stock Slides
AT&T pays $1.11 a year, which works out to a 5.1% forward yield at $21.63. Shares are down 8.68% year to date. Management has committed to keeping the payout at $1.11 through 2028.
Net debt to adjusted EBITDA rose to 3.13x from 2.68x after the $23 billion EchoStar spectrum purchase. Management doesn’t expect to get back to its 2.5x target until 2029. Third-quarter free cash flow of $4.95B fell 5.93%, and dividends plus buybacks used $4.753B of it. Legacy copper revenue dropped 24.5%. AT&T has also cut before: the quarterly payout went from $0.52 to $0.2775 in 2022.
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For the payout to hold, AT&T needs to deliver its $18B+ 2026 free cash flow target and close the Mexico sale. If cash gets tight, buybacks are the obvious first cut.
