It seems like old times at AT&T Inc.
The largest U.S. phone company announced a $15.2 billion stock buyback yesterday and raised its dividend 13 percent, the biggest increase in AT&T history.
The company's shares climbed the most in almost five years.
"Ma Bell is back," said Jack White, research director of Todd Investment Advisors Inc., of Louisville, Ky. "This company dominates most of the growth areas of the market."
AT&T chief executive officer Randall Stephenson, who took over the company in June, is reaping the benefits of its more than $100 billion in acquisitions and its exclusive rights to sell Apple Inc.'s iPhone. Both have helped him to 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 a share, for a yield of about 4 percent. That compares with a 2.2 percent yield for stocks in the Dow Jones industrial average.
The biggest increase before yesterday 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 with BellSouth Corp. later.
The company said it planned to repurchase as many as 400 million shares, or about 6.6 percent of the stock outstanding, by 2009. AT&T bought back more than $13 billion in shares under a program announced in 2006.
"Clearly they believe their stock's undervalued, which is great for investor confidence," Wachovia Securities L.L.C. analyst Jennifer Fritzsche said in an interview. The size of the dividend boost and the buyback exceeded her estimates, she said.