Discussion Question Essay Example | Topics and Well Written Essays - 1000 words

Discussion Question - Essay Example The dividend cut was aimed at reducing the company’s debts of $62 million (USATODAY, 2000). The idea was that with reduced debts the annual interest on the debt load would decrease but many investors rely on the dividend income. This was something unusual that AT&T had done in 2000 because even during the Great Depression when other industrial giants had reduced their dividend, AT&T had been able to maintain it (Forbes, 2000). This drastic step was taken so that the savings through lower dividend would help them clear the debt, enhance profits and invest in growth, which was aimed at maximizing shareholder wealth. In 2000, there was corporate restructuring and the company’s profits were split in four ways and hence such a decision had to be taken. Apart from the year 2000, AT&T has been consistently registered growth in dividend payouts while the earnings per share (EPS) have been decreasing since 1998 (DGI, 2008). The annual dividend payouts have increased over the past ten years at an annual average of 4.80% even though there has been lack of growth in profits over the past decade. A 5% growth in dividend suggests that the dividend payouts double every 14 or 15 years. The quarterly dividends that AT&T paid in 2007 were double of what they paid in 1991. Even though the dividend yield at AT&T is above average, the EPS has declined. Unless there is growth in the EPS the company will not be able to maintain its current dividend policy of annual growth in dividend payouts. T-Mobile International, one of Deutsche Telekom AGs (NYSE:DT) four strategic divisions, is one of the worlds leading international wireless communications providers. T-Mobile has a dividend yield of 7% which is considered to be quite decent (Vinzant, 2008). Except for 2001, T-Mobile has been maintaining growth in dividend payouts because they believe in paying their shareholders