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# This Ultra-High-Yield Dividend Stock’s Investors Can Breathe a Sigh of Relief Shares of **AT&T** (NYSE: T) have fallen more than 25% from their 52-week high. The concern for investors is that this decline may affect the sustainability of the company’s dividend, which currently yields over 7%. However, recent statements from AT&T’s CFO suggest that the company is on track to meet its free cash flow guidance for the year, providing reassurance to dividend investors. AT&T’s CFO, Pascal Desroches, recently affirmed that the company expects to generate between $4.5 billion and $5 billion of free cash flow in the third quarter and at least $16 billion in free cash flow for the year. This level of cash flow would allow the telecom giant to fund its dividend and work towards reducing its debt. While AT&T has not made significant progress in reducing its net debt over the past year, the company expects to generate $11 billion in cash in the second half of 2023. After paying dividends and other costs, this would leave the company with over $4 billion, contributing to a decrease in its leverage ratio. AT&T aims to achieve a leverage ratio of 3.0 by the end of this year and improve it to 2.5 by 2025 through excess free cash flow. However, compared to its rival Verizon (NYSE: VZ), AT&T still has a higher leverage ratio. Verizon’s leverage ratio was 2.6 at the end of the second quarter, and the company aims to bring it between 1.75 and 2.0. Verizon’s lower leverage ratio has allowed it to increase its dividend for the 17th consecutive year. AT&T’s higher leverage ratio led to a dividend cut last year but is anticipated to stabilize as the company’s free cash flow and leverage ratio improve. AT&T’s high-yielding dividend is attractive to income-focused investors, but Verizon provides an even higher-yielding dividend with a current yield of 7.8%. Furthermore, Verizon’s lower leverage ratio and improving free cash flow profile make its dividend appear safer. As a result, Verizon may be a better choice for income-seeking investors. While concerns about AT&T’s dividend sustainability have diminished, the company is unlikely to increase its dividend until it reaches its leverage target of 2.5 in 2025. In summary, AT&T’s dividend appears more secure after the company reaffirmed its free cash flow guidance. However, Verizon’s higher-yielding dividend and improving financials make it a more attractive option for income-seeking investors. *The Motley Fool Stock Advisor newsletter recommends 10 stocks that it believes are better investments than AT&T.*
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