This repurchase plan is on top of another 300 million-share repurchase scheme initiated in 2010. AT&T has repurchased 143.5 million shares at a cost of $4.6 billion through the end of June 2012.
AT&T chairman and CEO Randall Stephenson said in a statement that "This action allows us to continue returning cash to our shareholders through dividends and buybacks while maintaining a strong balance sheet and investing in the future of our business."
AT&T shareholders are probably feeling pretty good about their investment in the carrier. So far this year, AT&T stock has gone up 23%, and the company pumps out a steady quarterly dividend that yields 4.7% at current share price. But there are two things about this announcement that make me, as an AT&T stockholder, a bit uneasy.
First, there is the company's dwindling supply of cash on hand. Since the beginning of the year, cash and equivalents dropped from $3.19 billion to $2.15 billion. For a capital expenditure-heavy industry such as wireless telecom, is the buying back of shares at a relatively high multiple -- a P/E of almost 50 -- as wise as using that cash to expand its LTE network? As it now stands, Verizon
My second cause of concern is even more troubling. Was this buyback program initiated mainly to raise the stock price above a certain executive-compensation threshold? As chairman of AT&T's board of directors, Randall Stephenson has influence that could tip the scales of any compensation decisions regarding his pay as CEO.
Could this be one way to recover part, or all, of that $5 million he lost in his 2011 pay because of the failed AT&T/T-Mobile USA merger? That setback moved Stephenson into fourth place in the 2011 wireless industry executive-compensation race. His total compensation of $22 million fell just behind Verizon CEO Lowell McAdam, at $23.12 million, and second-place Motorola Solutions CEO Greg Brown, who pulled in $29.33 million. In first place, and in a position that would take more than some stock buyback plan to usurp, is Apple's
I hope the stock repurchase-plan is done for the right reasons, but the cynic in me is always wondering.
AT&T has long been an income investor's favorite. But there are other good income producers out there that must also be considered. Get this Motley Fool report: "Secure Your Future With 9 Rock-Solid Dividend Stocks." It is a must-have for the dividend lover ... and it's free! Or to get the full skinny, including positives and negatives and 12 months' worth of updates, you can check out the Fool's brand-new premium report on the iEverything powerhouse, Apple.
Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.