AT&T rewards investors as mergers pay off

It seems like old times at AT&T Inc.

The largest U.S. phone company announced a $15.2 billion stock buyback Tuesday and raised its dividend 13 percent, the biggest increase in AT&T history. The shares climbed the most in more than a year.

"Ma Bell is back," said Todd Investment Advisors research director Jack White, whose Louisville, Ky.-based firm manages 1 million AT&T shares. "This company dominates most of the growth areas of the market."

Chief Executive Officer Randall Stephenson, who took over the company in June, is reaping the benefits of AT&T's more than $100 billion in acquisitions and its exclusive rights to sell Apple Inc.'s iPhone.

Both have helped him build AT&T back into a Ma Bell-like powerhouse, whose sales have surged for three straight quarters, giving him the cash to reward investors.

AT&T raised the quarterly dividend to 40 cents, for a yield of about 4 percent. That compares with a 2.2 percent yield for the Dow Jones Industrial Average.

The biggest increase before today was an 11 percent boost in 2003, when the company was still known as SBC Communications Inc.

In 1996, the U.S. Federal Communications Commission eased antitrust rules, setting the stage for SBC to merge with AT&T Corp. in 2005 and later BellSouth Corp.

AT&T predicted "double-digit" earnings-per-share growth for 2008 as users download more videos and surf the Web on their mobile phones.

AT&T's chief financial officer, Rick Lindner, said the outlook assumes a "soft landing" for the economy rather than a recession, but that the company hasn't noticed a wide impact on consumer spending brought on by the trouble in the housing market.

There has been a "a slight uptick" in bad debt expense from phone subscribers, however.

By contrast, the nation's largest cable company, Comcast Corp., last week trimmed its revenue and cash flow forecasts for the year, saying consumers had cut back.

AT&T shares climbed $1.50, or 4 percent, to $39.40 on the New York Stock Exchange, the biggest gain since July 2006. The shares have risen 10 percent this year.