Is AT&T's Dividend in Danger?
AT (NYSE: T) offers a high dividend yield of 6.3%. But the business isn't in great shape, with the company's financials showing signs of weakness in the latest quarter. This isn't new territory for the company; there were doubts about the dividend before it spun off WarnerMedia, which is now part of Warner Bros. Discovery. And even though it has adjusted its dividend payments since the spinoff, investors may be worried that another adjustment to the dividend may be necessary.
Free cash flow is what is left of a company's operating cash flow after factoring in capital expenditures. It's an important figure for dividend stocks because it tells investors how much cash is effectively available to pay dividends from its day-to-day operations.
Suppose a company isn't generating sufficient free cash flow to pay the dividend. In that case, it may need to dip into its existing cash balance or potentially raise money just to maintain the payout. If the situation persists, it can put the company's dividend in jeopardy. That is the problem that computer company Intel ran into and why it ended up having to slash its dividend payments by 65% earlier this year.
Source Fool.com
