T-Mobile's Dividend Debut Boosts Stock, $19 Billion Shareholder Return Announced

Shares of telecom titan T-Mobile Us Inc TMUS are trading higher during Thursday’s trading session after the company announced the initiation of a dividend growth model.

This also came on the heels of the company's recent announcement of a $19 billion shareholder return program.

The program is in line with the expiration of the initial $14 billion program and will run up to $19 billion through 2024, equating to $3.75 billion per quarter, according to a Morgan Stanley note issued to investors on Thursday. Reserved for dividends is about $750 million of the quarterly return with T-Mobile aiming to start the dividends by the end of 2023.

The annual initial payout is $3 billion, with ambitions to grow it by around 10% each year.

While dividends will form a sizable part of the returns to shareholders, the company is also earmarking about $3 billion per quarter for stock buybacks. It translates to an estimated $15 billion over the subsequent five quarters.

Morgan Stanley had been waiting in the wings, expecting a new buyback announcement. The investment bank’s base case hinged on over $18 billion in capital returns over the upcoming 12 months, with a small portion allotted for dividends.

The buyback program, comprising approximately $12 billion in annualized buybacks and dividends totals $15 billion. While slightly below Morgan Stanley's projections, the pacing of buybacks might outpace the predicted five-quarter duration.

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Now, how can investors tap into the dividend goldmine?

By The Numbers: Using the current price of $139.32 per share for T-Mobile and an implied dividend yield of 1.9%, here's the math for earning $500 a month from the stock:

For a consistent $500 monthly return ($6,000 annually), an investor would need to own approximately 2,267 shares, which would cost about $315,790. For those with a more modest investment horizon, 454 shares, costing $63,158, would result in a $100 monthly dividend.

It's worth noting that dividend yields are dynamic, fluctuating with both dividend payments and stock price changes.

For instance, if a stock gives an annual dividend of $2 and its current price is $50, the dividend yield stands at 4%. However, if the stock price surges to $60, the dividend yield drops to 3.33% ($2/$60).

TMUS Price Action: T-Mobile shares are trading 2.86% higher at $137.97 Thursday at publication, according to data from Benzinga Pro.
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