T-Mobile: A Dividend Player-in-Wait (NASDAQ:TMUS)

Justin Sullivan

Let’s be honest. T-Mobile US, Inc. (NASDAQ:TMUS) has made a living by first imitating and then doing at least some things better than AT&T (T) and Verizon Communications Inc. (VZ). So much so that T-Mobile is now a larger company than the two giants in terms of market cap, although the Sprint merger played a big part in that.

TMUS earnings (

As before, T-Mobile will not pay any dividends. So this exercise involves some assumptions. AT&T’s current yield is about 6%, while Verizon is yielding about 7%. Let’s say T-Mobile starts with half AT&T’s yield, say 3%. A yield of 3% based on the current share price of $142.50 means an annual dividend of $4.28. (Or a quarterly dividend of $1.07/share). T-Mobile’s expected EPS is estimated at $7.30. Therefore, an annual dividend of $4.28 translates into a payout ratio of about 60%. That’s a pretty reasonable number. Readers may recall that I prefer Free Cash Flow (“FCF”) to EPS. This becomes particularly critical for capital-intensive businesses such as communications services. So let’s check the (imaginary) split coverage with FCF. T-Mobile has an outstanding share count of 1.219 billion. That means to meet my dividend assumption above, T-Mobile should generate average FCF of $1.30 billion each quarter. That is, 1.219 billion times $1.07. On an annual basis, that’s $5.21 billion needed to cover the assumed dividend. T-Mobile’s highest quarterly FCF over the last 5 years was $941 million, with an average of -$700 million. I found it hard to believe that the company actually ran out of cash after covering operating and capital costs. I generally trust YCharts numbers, but that seemed a bit unbelievable considering the growth T-Mobile has seen since I last followed them as a consumer. So I took the Financials on Seeking Alpha and the negative FCF numbers as actually true. As shown below, T-Mobile has not had a positive FCF per share since 2013, with 2022 being the closest at minus 42 cents. For comparison, in 2022 AT&T earned 1.73 FCF per share and paid $1.11 in dividends. Verizon earned 2.48 FCF per share and paid $2.61 in dividends.

FCF Seeks Alpha (

FCF Seeks Alpha (



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