15 Jan
What You Should Know About AT&T’s Long Term Debt
Rarely do we hear people mention AT&T’s long term debt and when it comes due.
There are two things, I think to look at when assessing a company’s long term debt-
If the company has largely predictable cash flow and if that cash flow can cover or service their debt.
“Largely predictable” of course is making a prediction, but, companies like AT&T (T) and Procter & Gamble (PG) come to mind when I think of “predictable” cash flow.
AT&T will be spinning off Warner Media after the merger with discovery, and expects free cash flow (the money left after everything is paid for) of about $20 Billion per year. Sure dividend has a fantastic article about this here.
The new dividend payout ratio is expected to be 40% to 43% of free cash flow, or $8.0 to $8.6 Billion dollars. For arguments sake, let’s round this to $9 Billion annually.
That leaves $11 Billion ($20 Billion – $9 Billion) to pay debt with after dividends are paid out.
On AT&T’s Investors website, Click Financial Reports>Debt>Debt Detail as of September 30, 2021 PDF (or just click here), to find the company debt breakdown.
Here you will find all of AT&T’s debt, what type, how much and when it is due. You’ll notice that it’s spread out pretty far and wide. Like, really far out, man -AT&T has debt that won’t come due until July of 2097!
So I was curious what AT&T’s debt looks like that will come due the next 5 years out and this is what I found –
2022 – $2,118,743,000
2023 – $7,165,572,276
2024 – $10,126,851,206
2025 – $5,189,903,416
2026 – $10,904,421,955
2027 – $6,393,576,118
Total – $42,529,067,971
Roughly $43 Billion in AT&T’s long term debt will come due in the next 5 years. If we assume $11 Billion per year in static free cash flow, they will have more than enough to cover their debt.
The point of this post is to let you know that when put in proper context, while their debt it a REALLY large number, I believe they will generate more than enough cash flow to pay their debt AND to increase that new and “right sized” dividend.
Let us know what you think or if you have any questions.
Cheers and never stop investing in yourself.
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