T-Mobile US Inc. witnessed a decline in its share price on Wednesday, despite the announcement of a substantial $19 billion shareholder-return program slated to run through 2024. This comprehensive program encompasses both stock buybacks and dividend distributions.
Under this newly unveiled initiative, the company will initiate dividend payments for the first time, commencing in the fourth quarter, in addition to ongoing stock repurchases. It is noteworthy that this shareholder return program is supplementary to the $14.0 billion share repurchase program that received board authorization in September 2022, as emphasized in the company's statement.
Nevertheless, T-Mobile's stock (TMUS, +4.03%) experienced a decline of 2.7% during afternoon trading, performing below its industry peers and the broader stock market. The Communication Services Select Sector SPDR exchange-traded fund (XLC) slipped by 0.4%, while the S&P 500 (SPX) declined by 0.7%.
It is imperative to clarify that this program is an augmentation of the $14 billion stock-repurchase program initially announced in September 2022. T-Mobile has outlined its intention to allocate approximately $750 million towards dividends in the fourth quarter. With 1.18 billion shares outstanding as of July 21, this equates to a per-share dividend estimate of around 64 cents for the fourth quarter.
For 2024, the company has strategized quarterly dividends amounting to $3 billion, with the expectation of a subsequent annual growth rate of approximately 10% in per-share dividends. This leaves approximately $15.25 billion earmarked for share repurchases, spanning from October 1 through December 31, 2024. The buyback program initiated last year concluded on September 30.
It is noteworthy that the allocation for buybacks represents approximately 9.6% of the company's current market capitalization, which stands at $159.23 billion.
T-Mobile disclosed that Deutsche Telekom AG, holding slightly over half of its outstanding shares, does not currently have plans to sell shares directly to the company within the framework of the new shareholder-return program.
During the Goldman Sachs Communacopia Technology Conference, Chief Executive Mike Sievert commented on the company's ongoing performance, emphasizing its robust post-merger strategy, which has been yielding favorable results. The merger with Sprint Corp. was successfully completed on April 1, 2020.
Sievert stated, "We're in the middle of a multiyear strategy for this company post-merger that is working, and the business is performing very, very well. So that stability and quarter-after-quarter performance and demonstration of our ability to translate this strategy into cash flows has caused us as a board to go ahead and authorize the next tranche of shareholder remuneration."
T-Mobile US's stock has experienced a year-to-date decrease of 4.8%, while the communication services ETF has surged by 39.2%, and the S&P 500 has posted a gain of 16.3%.
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