Why AT&T Stock Popped Today

AT&T (NYSE: T) saw its stock rise by 4% early Tuesday morning after the company unveiled its "strategic plan to drive sustainable growth and enhanced shareholder returns" through the year 2027.

Key highlights of AT&T's announcement include:

• Constructing the largest fiber broadband network in the country, which aims to reach over 50 million customers.
• Returning $40 billion to shareholders via dividend payments and share buybacks in the next three years.
• Initiating this initiative with a $10 billion share repurchase program scheduled to run until the end of 2026.

AT&T's Strategic Approach

AT&T is pursuing a dual growth strategy that focuses on the expansion of 5G wireless services and the enhancement of its fiber broadband infrastructure. The company emphasizes that its investments in advanced technologies will provide exceptionally fast download speeds and also create opportunities for new products and innovations in artificial intelligence.

Financially, AT&T is projecting annual growth in wireless revenue between 2% and 3% through 2027. Meanwhile, its fiber business is set to expand at a faster pace, with growth expected to be in the mid-teens percentage range. Overall, the average revenue growth from both sectors is anticipated to be in the low single digits.

In terms of profitability, AT&T forecasts adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will increase by at least 3% annually over the next three years. The company's free cash flow is also projected to grow at around 4% each year, rising from $16 billion in 2025 to over $18 billion by 2027.

Investment Potential of AT&T Stock

AT&T's financial projections indicate that the company aims to generate a total of $51 billion in cash profits over the next three years, averaging around $17 billion per year. This cash flow is expected to comfortably cover the $40 billion earmarked for dividends and share buybacks, which should be well-received by income-focused investors.

With an annual free cash flow of $17 billion and the company's stock valued at $163 billion, this results in a price-to-free cash flow ratio of under 10 times. Such a valuation may attract value investors. The company also offers a dividend yield of 4.9% alongside its anticipated growth rate of 4%, marking AT&T stock as a potentially attractive buy.

AT&T, Stock, Investment