Wireless provider T-Mobile US recently announced that it will be paying a dividend for the first time starting in the fourth quarter. This move puts T-Mobile in line with its competitors AT&T and Verizon Communications. However, the stock market has reacted negatively to this news, despite the fact that share buybacks will continue to be T-Mobile’s primary method of returning cash to shareholders.
With T-Mobile’s stock currently priced at $135, the annual dividend yield is nearly 1.9%. The company expects the per-share dividend payment to increase by around 10% annually in the future. However, these yields pale in comparison to Verizon and AT&T, which offer dividend yields of 7.5% and 7.6% respectively.
After the announcement, T-Mobile’s stock experienced a slight decline in Wednesday afternoon trading, dropping by 1.5% around 2 p.m. ET. In contrast, the S&P 500 was down 0.9%. Some investors may prefer that T-Mobile focuses its shareholder returns on buying back stock.
Thanks to the financial benefits from its 2020 merger with Sprint, T-Mobile’s management anticipates returning a total of $60 billion to shareholders by the end of 2025. Over the past year, they have already spent approximately $12 billion on buybacks, repurchasing about 7% of the company’s stock. In September 2022, T-Mobile announced a previous shareholder return program that allowed for up to $14 billion in buybacks.
In their quarterly filing with the Securities and Exchange Commission, T-Mobile hinted at a possible change to their dividend policy in late July. The wording of the filing suggested that a dividend program was on the horizon.
