At first blush, recent comments from Mike Sievert just seem like more of the same bombastic chatter we've come to expect from a T-Mobile (TMUS +0.05%) chief executive. Former CEO John Legere began his trash-talking shortly after taking the helm back in 2012, and he didn't let up until he retired in 2020. So current CEO Sievert's statement last week that "we're outperforming this whole sector on growth" isn't particularly unusual language for long-term T-Mobile shareholders to hear.
The thing is, it's not just self-aggrandizing talk meant to draw attention to his company. T-Mobile really is outperforming rivals Verizon Communications (VZ 1.08%) and AT&T (T 0.36%) in several ways, including the one that matters the most. And its new dividend payments are going to be well supported.
What Sievert said
The statement was made shortly after Sievert's presentation at Goldman Sachs' annual Communacopia and Tech Conference last week -- a presentation which included the announcement of T-Mobile's first-ever dividend. In an interview with Yahoo! Finance's Brian Sozzi, Sievert justified that decision by reminding investors:
"In 2021, we laid out an aspiration that was big and bold that we saw up to $60 billion in shareholder returns during our planning horizon. This is the second installment: $19 billion over the next five quarters and, as part of that, our first-ever dividend -- a $3 billion annual dividend."
He added, for good measure, "We're outperforming this whole sector on growth, and our capital priorities have not changed."
Sievert didn't clarify in what way T-Mobile was beating its competitors. But, it doesn't entirely matter. Pick a metric, and the statement will likely hold true.
Take postpaid mobile subscriber growth, for instance. In the second quarter, T-Mobile picked up 1.6 million more of these high-value customers. AT&T only added 326,000, while Verizon only grew its retail postpaid customer base by 612,000 subscribers. Its churn rate (customer turnover) of only 0.77% was not only lower than Verizon's and AT&T's, but a record low for T-Mobile.
Translation: T-Mobile is doing a better job of getting new wireless customers and keeping them.
T-Mobile stock is outperforming shares of Verizon and AT&T as well, even if only by virtue of having lost less ground since the beginning of the year.
NASDAQ: TMUS
Key Data Points
Perhaps T-Mobile's most encouraging measures of superiority, however, are on the front that matters the most -- particularly as it pertains to funding the new dividend. Those are operating income and the closely related metric of operating cash flow. While for Verizon, those metrics have been stagnant for the past five years, and for AT&T, they've been declining, at T-Mobile, they have been rising.
TMUS Cash from Operations (Quarterly) data by YCharts.
More importantly, T-Mobile's operating income of $3.8 billion last quarter is more than enough to cover the upcoming quarterly dividend payout total of $750 million. Indeed, there's more than income coming in to support the total $19 billion worth of dividends and stock buybacks that Sievert is planning for the coming five quarters.
So how is T-Mobile doing what Verizon and AT&T seem unable to do even though they're all in the same business?
It's not so much what T-Mobile is doing, but what it isn't doing. For instance, T-Mobile isn't bogged down by a telecom business in Latin America that lost $39 million last quarter and lost $326 million last year. AT&T is. T-Mobile isn't maintaining a fiber-based cable television service that's losing customers but is still too big to simply shut down. Verizon is. Meanwhile, T-Mobile isn't being forced to take care of any legacy landlines leading all the way to businesses and homes. Both AT&T and Verizon are.
And that last set of assets are particular liabilities right now, as many of those old landlines are believed to be exuding toxic amounts of lead into the soil around and below them. The monetary cost to clean up that environmental hazard remains unknown, although early estimates put the figure in the single-digit billions of dollars.
Because T-Mobile was built from the ground up as a wireless company and limited its reach to wireless solutions, it doesn't have any of that proverbial baggage.
Income investors should consider T-Mobile stock
Investors looking for huge share price growth will want to look elsewhere -- T-Mobile just doesn't offer any opportunity for it. The U.S. wireless market is about as big as it's going to be, with data from Pew Research indicating that 97% of the nation's adults now own a smartphone. Much of whatever revenue growth is in the cards will stem from population growth, which has been slowing since the 1990s.
If you're a value-minded, income-seeking investor, though, T-Mobile has suddenly become a lot more interesting. The company's clearly doing something right, and Sievert's not starting something he won't be able to continue doing.
Indeed, given the company's operating income growth since 2020 -- when it began restructuring following its merger with Sprint -- Sievert's expectation that the company will be able to boost its payouts by about 10% a year not only seems completely within reach but makes T-Mobile one of the market's top dividend-growth stocks.
