In the world of telecommunications, a new player has emerged as a top contender for long-term dividend investors. T-Mobile, which initiated its dividend program just last year, has already announced a significant 35% increase in payouts. This bold move is backed by the company’s impressive free cash flow growth, which has skyrocketed from $3.2 billion in 2020 to $13.6 billion last year. Management expects this trend to continue, projecting free cash flow to reach $18-19 billion over the next three years.
What sets T-Mobile apart from its competitors, AT&T and Verizon, is its strategic approach to capital investments. By focusing on building out its 5G network and leveraging its spectrum portfolio, T-Mobile has managed to grow its free cash flow to levels rivaling its more established peers. Additionally, its partnership with Metronet and Lumos has allowed it to tap into their fiber assets, keeping capital expenditures low while still expanding its fixed-line assets.
T-Mobile’s commitment to returning value to shareholders is evident in its capital return program, which includes a significant share repurchase plan. With $50 billion earmarked for this program, the company is poised to increase its dividend payouts significantly over the next few years. In fact, management is targeting a mid-20% portion of free cash flow for its dividend, which could translate to 10% annual dividend increases.
While T-Mobile’s stock may be priced at a premium to its competitors, its strong EBITDA and free cash flow growth justify the extra cost. Patient investors who are willing to hold onto their shares for the long haul may be rewarded with substantial total returns from share repurchases and dividend growth. With its promising outlook and commitment to shareholder value, T-Mobile is an attractive option for those seeking a reliable dividend payer in the telecom industry.
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