Is AT&T's dividend safe in 2026?

AT&T's Q4 2025 8-K guidance shows FCF improving from $18B (2026) to $21B (2028). With $8.2B in annual dividends, this implies coverage improving from 2.2x to 2.6x—a strengthening, not weakening, trajectory.

Why doesn't T-Mobile rank highest despite the best dividend metrics?

TMUS's 4.29x coverage and 23% FCF payout look bulletproof, but $10B+ in recent acquisitions (UScellular, Lumos, Metronet) creates integration risk. Management tone is 'mixed' vs 'confident' for VZ and T.

What is interest capitalization and why does it matter for VZ?

Verizon capitalizes $7.9B of interest on wireless licenses under development, deferring expense recognition to future periods. This inflates current earnings and makes the 3.37x coverage ratio appear stronger than underlying cash generation supports.

Which telecom has the safest dividend for income investors?

Our risk-adjusted ranking is T > VZ > TMUS—reversed from surface metrics. AT&T's improving FCF trajectory and completed DIRECTV simplification outweigh its lower current coverage.

What's the biggest risk to all three telecom dividends?

Business Wireline secular decline affects both VZ (-2% YoY) and T (-7.5% YoY). This higher-margin segment is shrinking with no clear offset strategy from either company.

How does Verizon's debt load affect dividend safety?

VZ carries $144B total debt ($118B unsecured, $26B secured)—the highest absolute amount. Despite 3.37x coverage, aggressive accounting and restructuring charges ($1.2B severance) signal margin pressure.

Should I buy VZ for the 6.5% yield?

VZ's yield is attractive, but our analysis flagged 'aggressive' accounting practices and a 6/10 earnings quality score—the lowest of the three telecoms. Consider the earnings quality discount before chasing yield.

How did you calculate dividend coverage ratios?

Dividend Coverage = Operating Cash Flow (TTM) / Dividends Paid (TTM). We use OCF rather than earnings because it reflects actual cash available to fund dividends, excluding non-cash items.

Telecom Dividend Safety: What the Surface Metrics Miss

TMUS has the strongest dividend safety metrics—4.29x coverage, 23% FCF payout, 0.5x leverage—yet our analysis flags it as highest execution risk. AT&T, often dismissed for its 2.2x coverage, has the clearest path to dividend sustainability through 2028.

TL;DR: TMUS has the strongest dividend safety metrics across the board—yet our analysis flagged it as the highest execution risk. AT&T, often dismissed for its 2.2x coverage, has the clearest path to dividend sustainability through 2028. Our risk-adjusted ranking reverses the conventional view: T > VZ > TMUS.

Last Updated: January 29, 2026 Data Currency: Q3 2025 10-Q filings (VZ, T, TMUS); T Q4 2025 8-K earnings release

The Surface-Level View

If you screened telecom dividends using conventional metrics, you'd get this ranking:

Metric	VZ	T	TMUS	Surface "Winner"
Dividend Coverage	3.37x	2.23x	4.29x	TMUS
FCF Payout Ratio	29.7%	44.9%	23.3%	TMUS
Net Debt/EBITDA	2.82x	2.70x	0.50x	TMUS
ROIC (TTM)	17.4%	16.5%	18.9%	TMUS
Dividend Yield	~6.5%	~5.0%	~1.6%	VZ

Source: Q3 2025 10-Q filings, MetricDuck analysis

Most dividend screeners would rank TMUS > VZ > T and call it a day.

We didn't stop there. Our 5-pass filing intelligence analysis—covering management tone, accounting quality, hidden liabilities, and execution risk—tells a different story.

What the Numbers Miss

1. T-Mobile's Hidden Execution Risk

TMUS's metrics look bulletproof: 4.29x dividend coverage, 23% FCF payout, 0.50x leverage. But three qualitative factors—grounded in operational data, not sentiment—give us pause.

Integration Execution Risk

TMUS is in the midst of integrating over $10B in acquisitions simultaneously. According to their Q3 2025 10-Q, merger-related costs increased 356% year-over-year in the quarter—from $16M to $73M. The integration timeline extends through fiscal year 2027, with substantial costs yet to be incurred.

Their stated Top Risk #1 from the filing: "Key personnel transition impacting strategy execution." This isn't boilerplate—it reflects the operational reality of absorbing multiple large acquisitions while managing executive turnover.

$10B+ in Acquisitions Requiring Integration

TMUS has deployed significant capital into acquisitions that must be integrated:

Acquisition	Amount	Status
UScellular Wireless	$4.4B	Integrating
Metronet (fiber)	$4.6B	Integrating
Lumos (fiber)	$932M	Integrating
Vistar Media	$621M	Completed
Blis Holdco	$180M	Completed

The stated goal is $1.2B in annual cost synergies—but the timeline extends through 2027, and their Top Risk #1 is explicitly "key personnel transition impacting strategy execution."

Hidden Liabilities: Moderate Risk

TMUS is the only telecom we rated "Moderate" for hidden liabilities (vs. "Low" for VZ and T). Key concerns:

Purchase obligations extending through 2045
Guarantees related to Sprint merger commitments
Future capital contributions to Lumos joint venture
Ongoing litigation with uncertain outcomes

Our Take: TMUS's 4.29x coverage ratio provides a cushion, but that cushion exists because they're deploying capital into growth rather than returning it. If integration stumbles, the dividend—currently yielding only 1.6%—isn't the priority.

2. AT&T's FCF Trajectory: The Overlooked Catalyst

AT&T's 2.23x dividend coverage is the weakest of the three. Conventional analysis stops there. But AT&T's Q4 2025 8-K (filed January 28, 2026) discloses forward FCF guidance that transforms the story.

Forward FCF Guidance (From 8-K)

Period	FCF Guidance	Implied Coverage*
FY2026	$18B+	2.20x
FY2027	$19B+	2.32x
FY2028	$21B+	2.56x

Assuming $8.2B annual dividend (TTM)

This isn't a company struggling to maintain its dividend—it's a company with a clear, management-articulated path to strengthening coverage by 15% over three years.

The DIRECTV Simplification Is Complete

T's Q3 2025 results included a $5.5B gain from selling its DIRECTV stake. This wasn't just a financial event—it was strategic simplification. The related-party complexity is gone. Management can now focus on:

Fiber network expansion (Consumer Wireline broadband +6.7% YoY)
Mobility subscriber growth
Operating margin improvement (7.0% → 19.9% in Q3)

Capital Returns Demonstrate Commitment

In 2025, AT&T returned $12B to shareholders through dividends and share repurchases. This isn't a company quietly preparing to cut—it's one actively returning capital while improving FCF.

Historical Context: The 2022 Dividend Reset

AT&T cut its dividend by 47% in early 2022 following the WarnerMedia spinoff. The current dividend level ($8.2B annually) has been maintained since that reset. The FCF trajectory guidance suggests management is now focused on strengthening coverage from this rebased level—not stretching to maintain an unsustainable payout.

This context matters: T isn't a company straining to preserve a legacy dividend. It's a company that already took the pain and is now rebuilding from a defensible base.

Our Take: T's worst-in-class coverage ratio masks an improving trajectory. The analytical question isn't "will they cut?" but "how much will coverage improve?" The 8-K guidance suggests +15% by 2028.

3. Verizon's Accounting Quality Concerns

VZ looks solid on the surface: 3.37x coverage, confident management tone, "Low" hidden liability risk. But our accounting quality analysis flagged concerns.

Earnings Quality Score: 6/10 (Lowest)

Company	Earnings Quality Score	Accounting Aggressiveness
VZ	6/10	Aggressive
T	7/10	N/A
TMUS	7/10	N/A

Why Does T Score Higher Than VZ?

T's operating income margin improved from 7.0% to 19.9% in Q3 2025—driven by the DIRECTV exit, transformation efforts, and expense management. These are genuine operational improvements reflected in cash flow. VZ's interest capitalization (detailed below) masks true interest expense, artificially inflating apparent profitability. When we adjust for accounting quality, T's reported earnings more closely reflect actual cash-generating ability.

The Interest Capitalization Red Flag

From VZ's accounting quality analysis:

"Approximately $7.9 billion of wireless licenses were under development for commercial service for which interest costs were being capitalized."

What this means: Instead of recognizing interest expense on the income statement, VZ defers it to the balance sheet as part of the asset cost. This inflates current-period earnings and makes coverage ratios appear stronger than underlying cash generation supports.

Restructuring Signals

VZ recorded $1.2B in severance charges from a voluntary separation program. This is management preparing for margin pressure—not a one-time event, but a structural response to:

Business segment revenue decline (-2.0% YoY)
10% decrease in device upgrades
Intensifying competition

Debt Load: Highest Absolute

Company	Total Debt	Net Debt/EBITDA
VZ	$144B	2.82x
T	$139B	2.70x
TMUS	$83B	0.50x

VZ carries the highest absolute debt: $118B unsecured + $26B secured. While the 2.82x leverage ratio isn't alarming, it provides less cushion than TMUS's 0.50x if operating conditions deteriorate.

Our Take: VZ's 3.37x coverage looks solid, but adjust for aggressive accounting and restructuring activity, and the true cushion is thinner. The 6.5% yield comes with earnings quality risk.

The Common Threat: Business Wireline Decline

Both VZ and T face a structural headwind that neither has clearly addressed: Business Wireline secular decline.

Company	Business Wireline Change	Commentary
VZ	-2.0% YoY ($29.5B → $30.1B)	"Business segment experienced revenue decline"
T	-7.5% YoY	"Driven by continued secular pressures on legacy and transitional services"

This matters for dividend investors because:

Business Wireline carries higher margins than Consumer Wireless
The decline is accelerating, not stabilizing
Neither company has articulated a clear offset strategy
This is structural (enterprise migration to cloud/IP), not cyclical

TMUS is less exposed—their acquisition strategy focuses on consumer wireless and fiber expansion rather than enterprise wireline.

Risk-Adjusted Dividend Safety Ranking

When we layer qualitative factors onto quantitative metrics, the ranking inverts:

Factor	VZ	T	TMUS
Surface Safety Metrics	2nd	3rd	1st
Earnings Quality	3rd (6/10)	1st (7/10)	2nd (7/10)
FCF Trajectory	Stable	Improving	Growth-dependent
Execution Risk	Low	Low	High (356% cost increase)
Integration Burden	None	Complete (DIRECTV)	$10B+ in progress
Hidden Liabilities	Low	Low	Moderate
Overall Dividend Safety	2nd	1st	3rd

Our Ranking: T > VZ > TMUS

This reverses the conventional view. Here's the logic:

AT&T (1st): Lowest current coverage, but clearest improvement trajectory ($18B→$21B FCF). DIRECTV simplification complete. Management actively returning capital.
Verizon (2nd): Solid coverage, but aggressive accounting inflates apparent safety. Highest absolute debt. Business segment declining with restructuring underway.
T-Mobile (3rd): Best metrics by far, but highest execution risk from $10B+ acquisitions. Integration costs up 356% YoY. Dividend is low priority (1.6% yield) vs. growth investment.

Sensitivity Analysis

Our ranking assumes AT&T meets its FCF guidance. What if they don't?

If T misses FCF guidance by 10%: 2028 coverage would be 2.3x instead of 2.56x—still improving from today's 2.23x. The thesis holds.
If TMUS achieves full synergies on schedule: Execution risk diminishes, but the 1.6% yield remains unattractive for income-focused investors. The ranking doesn't change.
If VZ's Business segment accelerates decline: The 3.37x coverage shrinks as restructuring costs increase. VZ's position weakens.

We rate our T > VZ > TMUS conclusion with moderate confidence (65-75%), contingent primarily on AT&T's FCF execution.

Methodology

Dividend Coverage Ratio

Coverage = Operating Cash Flow (TTM) / Dividends Paid (TTM)

We use OCF rather than net income because it reflects actual cash available to fund dividends, excluding non-cash charges and working capital distortions.

FCF Payout Ratio

FCF Payout = Dividends Paid (TTM) / Free Cash Flow (TTM)

Lower is safer—it indicates more cushion between what's generated and what's paid out.

Earnings Quality Assessment Our 5-pass filing intelligence analysis evaluates:

Narrative quality (management tone, forward guidance)
Accounting quality (aggressiveness, red flags, non-recurring items)
Hidden liabilities (off-balance sheet exposure, contingencies)
Risk landscape (top risks, severity, trajectory)
Segment performance (revenue quality by business line)

Management Tone Classification NLP-based sentiment analysis on MD&A sections, classifying overall tone as:

Confident (strong forward assertions, growth language)
Mixed (cautious disclaimers, uncertainty hedging)
Defensive (risk-focused, decline acknowledgment)

Data Sources

This analysis draws on MetricDuck's systematic review of SEC filings using our 5-pass filing intelligence framework, which has been applied to 938+ public companies.

VZ: Q3 2025 10-Q (filed October 29, 2025)
T: Q3 2025 10-Q (filed October 31, 2025)
T: Q4 2025 8-K (filed January 28, 2026)
TMUS: Q3 2025 10-Q (filed October 23, 2025)

The Bottom Line

Surface metrics tell you TMUS is the safest telecom dividend. Our deep analysis disagrees.

For yield-focused investors: AT&T's 5% yield with an improving FCF trajectory offers better risk-adjusted income than Verizon's 6.5% with accounting concerns.

For growth-oriented investors: T-Mobile's 1.6% yield isn't the draw—capital appreciation from acquisition synergies is. Just understand you're betting on execution, not dividend safety.

For conservative income investors: Consider whether any telecom dividend meets your criteria, given the shared headwind of Business Wireline decline that neither VZ nor T has clearly addressed.

The numbers only tell part of the story. Read the filings.

Disclosure: MetricDuck Research does not hold positions in VZ, T, or TMUS. This analysis is independent and not sponsored. We will update this analysis after Q1 2026 earnings releases.

This analysis is for informational purposes only and does not constitute investment advice. Past performance does not guarantee future results. All three companies maintain investment-grade credit ratings. Always conduct your own due diligence before making investment decisions.