How To Earn $500 A Month From AT&T Stock

AT&T Inc. T CFO Pascal Desroches spoke Tuesday at the Bank of America C-Suite Technology, Media and Telecommunications Conference, providing updates on the telecom giant’s performance and strategies.

What Happened: Desroches reiterated AT&T's full-year free cash flow target of $16 billion or more for 2023. He also mentioned the company’s projected second-quarter free cash flow, expected to range between $3.5 to $4.0 billion.

AT&T is tracking to just over 300,000 postpaid phone net additions for the second quarter. The telecom company also shared plans to deploy a generative AI tool for its employees.

With the company's updates in mind, coupled with the stock trading near one-year lows, its 6.97% dividend yield may be attractive for investors looking for capital upside along with substantial dividend payouts.

Though, it should be noted AT&T is sometimes referred to as a "dividend trap," attributed to the company’s long-term stock price decline, considerable debt load of over $137 billion as of March 31, and competition in a mature telecommunications market.

Check out Benzinga’s dividend calendar.

Despite near-term challenges, here's what investors would need to do in order to earn $500 per month from AT&T.

We'll start with our monthly target of $500, which would translate to $6,000 per year ($500 x 12 months).

Next, we'll take the $6,000 and divide it by AT&T's 6.97% dividend yield: $6,000 / 0.0697 = $86,083.21.

So, an investor would need to own approximately $86,083.21 worth of AT&T, or 5,417 shares to generate a monthly dividend income of $500.

Remember, while AT&T’s stock currently ebbs around one-year lows, there’s potential for upside capital gains accompanying its dividends.

Assuming a more conservative goal of $100 monthly ($1,200 annually), we do the same calculation: $1,200 / 6.97% = $17,216.64, or 1,084 shares to generate a monthly dividend income of $100.

Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.

The dividend yield is calculated by dividing the annual dividend payment by the current stock price. As the stock price changes, the dividend yield will also change.

For example, if a stock pays an annual dividend of $2 and its current price is $50, its dividend yield would be 4%. However, if the stock price increases to $60, the dividend yield would decrease to 3.33% ($2/$60).

Conversely, if the stock price decreases to $40, the dividend yield would increase to 5% ($2/$40).

Further, the dividend payment itself can also change over time, which can also impact the dividend yield. If a company increases its dividend payment, the dividend yield will increase even if the stock price remains the same. Similarly, if a company decreases its dividend payment, the dividend yield will decrease.

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