AT&T and Icahn Enterprises Face Dividend Cuts Amid Debt and Struggles

AT&T struggles with a $155 billion debt load, potentially triggering another dividend reduction. Icahn Enterprises faces accusations of unsustainable dividend practices, causing its stock to shed $6 billion in value.

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Nitish Verma
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AT&T and Icahn Enterprises Face Dividend Cuts Amid Debt and Struggles

AT&T and Icahn Enterprises Face Dividend Cuts Amid Debt and Struggles

Two high-yield dividend stocks, AT&T and Icahn Enterprises, are grappling with financial challenges that could force them to slash their payouts to investors. Both companies are burdened by substantial debt loads and accusations of unsustainable business practices, raising red flags for income-seeking shareholders.

Why this matters: The financial struggles of these high-yield dividend stocks have significant implications for investors seeking stable income streams, and may signal a broader trend of dividend cuts across the market. As major companies struggle to service their debt, it could have a ripple effect on the entire economy, impacting consumer spending and economic growth.

AT&T, the telecommunications giant, is struggling under the weight of a staggering $155 billion debt pile. With interest rates on the rise, servicing this massive debt could become increasingly onerous, potentially triggering another dividend reduction. The company already ended its 35-year streak of dividend increases in August 2023 by keeping the payout flat.

Despite its financial woes, AT&T has faced criticism for its executive compensation practices. CEO John Stankey's pay package ballooned to $26.5 million in 2023, while CFO Pascal Desroches received $12.7 million, both increases from the previous year. The company is also under scrutiny from the Environmental Protection Agency over lead-sheathed cables that may have contaminated soil and water sources.

Meanwhile, Icahn Enterprises, the investment vehicle of billionaire Carl Icahn, is turning heads with its jaw-dropping 22.67% dividend yield. However, short seller Hindenburg Research has accused the company of employing a "Ponzi-like structure to pay dividends to investors," causing the stock to shed $6 billion in value in May 2023.

With Icahn himself owning 58% of the company's shares, concerns have mounted over the sustainability of the generous payouts. Icahn Enterprises' stock has languished below $20 since October 2023, save for a brief uptick in February, leading some to label it "dead money" for nearly a year.

As AT&T and Icahn Enterprises navigate these treacherous waters, income investors are left to ponder the safety and reliability of their dividends. With debt levels soaring and accusations of unsustainable practices swirling, the once-attractive yields of these companies may prove to be more trouble than they're worth.

Key Takeaways

  • AT&T and Icahn Enterprises face financial challenges, threatening dividend cuts.
  • AT&T's $155 billion debt and rising interest rates may trigger dividend reduction.
  • Icahn Enterprises' 22.67% dividend yield is under scrutiny due to "Ponzi-like" structure.
  • Both companies' debt levels and business practices raise red flags for income investors.
  • Dividend cuts could have a broader impact on the economy and consumer spending.