AT&T (NYSE:T) wants to put more cash in your pocket.
The telecommunications giant said on Friday that its board of directors approved a 2% increase in its quarterly cash payout, to $0.52 per share. The new, higher dividend will first be paid on Feb. 3 to shareholders of record on Jan. 10.
AT&T's annualized dividend of $2.08 places its stock's yield at a hefty 5.4%.
AT&T also made several other announcements. The company said that it began repurchasing its shares in the fourth quarter and expects to buy back 100 million shares in the first quarter of 2020. AT&T entered into a $4 billion accelerated share repurchase agreement to hasten this process.
Additionally, the telecom said that it's on track to hit its debt-reduction goals. This includes bringing its net debt-to-adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio to approximately 2.5 in 2019 and as low as 2.0 by the end of 2022.
AT&T is selling off noncore assets to help it meet these targets. The company said it has already raised $15 billion from asset sales in 2019 and expects to raise an additional $4 billion by the middle of next year.
Top stock pick for 2020
For these and other reasons, Bank of America on Tuesday named AT&T its top recommendation among telecom stocks in 2020.
Analyst David Barden said AT&T's share repurchases should help to support its stock price. A lower share count combined with accelerating earnings growth fueled by cost reductions could help to drive AT&T's shares significantly higher next year, according to Barden.
Moreover, Barden expects AT&T to benefit from T-Mobile's (NASDAQ:TMUS) pending merger with Sprint (NYSE:S). If approved by regulators, the merger would combine the No. 3 and No. 4 U.S. wireless carriers. A deal could result in reduced competitive pressure on AT&T, since it would lessen the need for Sprint and T-Mobile to rely on aggressive promotions to gain subscribers. A combined T-Mobile and Sprint would have more customers -- and corresponding scale advantages -- than either company could obtain alone from trying to undercut AT&T on subscription plan prices.
Barden also believes that investors are underestimating AT&T's ability to execute its new three-year financial plan. In turn, AT&T's stock is trading at a significant discount relative to the market. The telecom's shares can currently be had for less than 11 times analysts' earnings estimates for 2020, compared to more than 19 times estimates for the S&P 500.
Yet Barden notes that AT&T is the best-performing U.S. wireless stock so far in 2019. Shares have already surged more than 35% this year -- and Barden expects AT&T's gains to continue in 2020.