AT&T Inc., the largest U.S. phone company, will probably boost its dividend and announce a share- buyback plan tomorrow as customer gains and demand for wireless data services help its cash flow, analysts’ estimates show.

AT&T may raise its quarterly dividend to 43 cents from 42 cents, said Credit Suisse Group AG’s Jonathan Chaplin and Piper Jaffray & Co.’s Chris Larsen, echoing estimates based on data compiled by Bloomberg. The new payout would represent a 6.5 percent yield on the carrier’s average stock price this year.

Chief Executive Officer Randall Stephenson has attracted 6.1 million wireless customers this year with devices such as Apple Inc.’s iPhone, while reducing the average rate at which users leave. Last quarter, the carrier increased revenue by $847 million from a year earlier to $31.6 billion.

“AT&T has free cash to spend and one thing you can certainly do to cause investor returns is to repurchase shares,” New York-based Chaplin, who rates AT&T shares “outperform,” said in an interview. “AT&T has the ability to do it.”

The Dallas-based carrier’s board is likely to authorize a repurchase of as much as $12 billion, Chaplin said. New York- based Larsen said the repurchase is probably $8 billion to $10 billion, or 300 million to 400 million shares.

“After fully investing in its business, the company still has excess cash flow,” Larsen, who rates the stock “overweight,” said in a Dec. 7 note to clients.

McCall Butler, a spokeswoman for AT&T, declined to comment.

Throwing Off Cash

AT&T last authorized a repurchase in December 2007, setting out to buy back about 400 million shares by the end of 2009. It bought 164.2 million shares in 2008 for $6.1 billion and 133,000 in 2009 for about $3 million, according to company statements.

AT&T generated $11.6 billion of free cash flow in the first three quarters, down 16 percent from a year earlier.

“The business continues to throw off cash,” Chief Financial Officer Rick Lindner said in a Dec. 7 interview in New York. “That gives us flexibility to use excess cash, rather than pay down debt, for other things and share repurchase is something we’d certainly consider.”

AT&T rose 10 cents to $29.23 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have added 4.3 percent this year.

The company is upgrading its so-called third-generation wireless network and testing a fourth-generation network it expects to introduce by mid-2011, boosting capital expenditures by 18 percent to $13.7 billion this year through September.

The Bloomberg dividend data is based on seven criteria including a company’s guidance, dividend history and regression analysis.

“We have always believed strongly in the dividend,” Lindner said. “It’s normal for us in our business to provide a good portion of our return via our dividend.”

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

Share on Facebook

Businesses in the U.S. expanded in December at the fastest pace in two decades, adding to evidence the world’s largest economy is accelerating heading into 2011.

The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 68.6 this month, exceeded the most optimistic forecast of economists surveyed by Bloomberg News and the highest level since July 1988. Figures greater than 50 signal expansion.

Gains in business investment on new equipment and growing exports to emerging economies will keep factories churning out goods in the coming year, contributing to the recovery. Evidence that consumer spending is also picking up means retailers will need to restock shelves, giving manufacturing a further lift.

“The factory sector continues to be one of the consistent bright spots in the economy,” Michael Gregory, a senior economist at BMO Capital Markets Inc. in Toronto, said before the report. “Businesses are continuing to invest.”

The median forecast of 49 economists surveyed by Bloomberg News projected the gauge would fall to 61. Estimates ranged from 59 to 63.7.

A report today from the Labor Department showed claims for jobless benefits fell last week to the lowest level since July 2008, showing the labor market is improving heading into 2011. Filings decreased by 34,000 to 388,000 in the week ended Dec. 25, fewer than the lowest estimate of economists surveyed.

To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.

Share on Facebook

Industrial production in the U.S. increased more than forecast in November and consumer prices slowed, indicating the recovery is gaining momentum without generating inflation.

Output at factories, mines and utilities rose 0.4 percent, the biggest gain since July, after a revised 0.2 percent drop in October, a Federal Reserve report showed today in Washington. The consumer-price index climbed 0.1 percent in November after a 0.2 percent gain the prior month, the Labor Department said.

Assembly lines are speeding up as business investment and exports grow and consumer spending accelerates, helping to buoy an expansion that Fed policy makers said yesterday isn’t strong enough to reduce a jobless rate hovering near 10 percent. Price increases that are below central bankers’ goal will boost the case to maintain the Fed’s purchases of $600 billion in securities through June to spur growth.

“The manufacturing sector continues to heal itself,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets in Boston. “The outlook for business spending on equipment and software remains very positive.” Fed Chairman Ben S. Bernanke “is unlikely to withdraw accommodation until he sees a clear upward turning point in core inflation and a downward turn in unemployment.”

Stocks fell, dragging the Standard & Poor’s 500 Index down from a two-year high after a six-day rally left the gauge at its most expensive level since June. Economists forecast a 0.3 percent gain in production, according to the median of 75 projections in a Bloomberg News survey.

Stocks Gain

The S&P 500 declined 0.5 percent to 1,235.23 at the 4 p.m. close in New York. Treasury securities retreated, sending the yield on the benchmark 10-year note up to 3.53 percent from 3.48 late yesterday.

Factory production increased 0.3 percent for a second month, the Fed’s report showed, led by a 0.9 percent increase in business equipment, including computers, communications equipment and semiconductors.

Rising international demand and the need to replace aging equipment is a boon to manufacturers. Exports rose to a two-year high in October, Commerce Department figures showed Dec. 10. Business spending on equipment and software advanced at a 17 percent annual rate in the third quarter.

Broadcom Corp., the biggest maker of chips for television set-top boxes, yesterday increased its fourth-quarter revenue projection to about $1.9 billion, the top end of an earlier forecast range. Irvine, California-based Broadcom is making inroads in the mobile-phone market, supplying radio chips for handsets from South Korea’s Samsung Electronics Co. and Finland’s Nokia Oyj.

Extended Recovery

“We have seen now an extended period of time of recovery in the components business,” Paul Reilly, chief financial officer of Arrow Electronics Inc., said yesterday at a conference in New York. Melville, New York-based Arrow is a distributor of electronic components and computer products to industrial customers.

The need for truckers to replace aging vehicles has brought improvements at Wabash National Corp. The Lafayette, Indiana- based maker of semi-truck trailers has “nearly doubled” its workforce this year, adding over 1,200 associates, chief executive officer Richard Giromini said in a Bloomberg Television interview Dec. 13.

“The industry has improved dramatically, demand has increased and our customers are now feeling much more comfortable placing orders to replace their aged equipment going forward,” Giromini said.

Auto Production

Carmakers decreased output by 6 percent last month, the first drop since August, even as demand climbed, indicating production may rebound in coming months. Factory output excluding motor vehicles, rose 0.7 percent in November, the biggest gain since May.

Nationwide, capacity utilization, which measures the amount of a plant in use, increased to 75.2 percent last month, the highest level since October 2008. The gauge averaged 80 percent over the past 20 years, signaling there’s enough spare equipment to prevent bottlenecks that would lead prices higher.

“We’re very far from getting close to stretching industrial capacity,” said Michael Feroli, chief U.S. economist at JPMorgan Securities LLC in New York.

The median estimate of economists in a Bloomberg survey called for a 0.2 percent gain in the consumer-price index. The so-called core measure, which excludes more volatile food and energy costs, also rose 0.1 percent, matching the median forecast.

Price Cuts

Retailers that are cutting prices are drumming up demand, while those not discounting enough are struggling.

Best Buy Co., the world’s largest consumer-electronics retailer, yesterday slashed its annual profit forecast amid increasing competition from Wal-Mart Stores Inc. and Target Corp. Best Buy lost TV sales in the third quarter to “the large discounters” that promoted the least-expensive models, Chief Executive Brian Dunn said on a conference call.

Confidence among U.S. homebuilders was unchanged in December from a month earlier, indicating residential construction will stay near depressed levels, a National Association of Home Builders/Wells Fargo’s index showed today.

Fed policy makers are concerned economic growth is not strong enough to reduce unemployment, which climbed to a seven- month high of 9.8 percent in November.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Share on Facebook

General Electric Co. raised its dividend for the second time in five months, giving investors a 17 percent boost as Chief Executive Officer Jeffrey Immelt unlocks a war chest of cash hoarded in the financial crisis.

The quarterly payout will jump to 14 cents from 12 cents, after climbing from 10 cents in July, GE said today. The dual increases are GE’s first in a single year since 1992.

“Strong cash generation, accelerated recovery at GE Capital and solid underlying performance in our industrial businesses” drove the decision, Immelt said in a statement.

The higher dividend, payable Jan. 25 to shareholders of record on Dec. 27, marks a return to GE’s pattern of announcing annual increases in the fourth quarter, which the company did from 1983 through 2007. In February 2009, GE cut its quarterly dividend to 10 cents from 31 cents, about 68 percent, as the recession deepened.

The increase takes GE’s prospective dividend yield to 3.2 percent, higher than its multi-industry peers, Nigel Coe, a New York-based analyst with Deutsche Bank AG wrote in a note to clients.

“Dividend yield is not to be sneezed at in a yield-starved environment,” wrote Coe, who has a “hold” rating on the shares.

Discretionary Cash

GE climbed 59 cents, or 3.4 percent, to $17.72 at 4:15 p.m. in New York Stock Exchange trading, the most today among Dow Jones Industrial Average companies and GE’s biggest one-day gain since Sept. 1. The shares have added 17 percent this year.

GE has projected it will have $20 billion in discretionary cash at year-end, after asset sales including a majority stake of NBC Universal to a venture run by Comcast Corp.

Immelt, 54, may indicate how some of that money will be spent, signaling his confidence in GE’s growth prospects, when he discusses next year’s outlook in an annual meeting with investors on Dec. 14.

The Fairfield, Connecticut-based company reported its second consecutive earnings gain in the third quarter and showed simultaneous increases in service and equipment orders for the first time in two years.

The finance unit, GE Capital, forecast full-year profit of $3 billion this week, with further growth next year and in 2012. Last year, the unit’s earnings dropped about 80 percent to $1.7 billion.

‘Bolt-On’ Acquisitions

GE no longer provides a per-share forecast, instead giving investors a framework for calculating their own. The company may earn $1.12 a share in 2010 and $1.27 a share in 2011, the average estimates from analysts surveyed by Bloomberg.

In addition to boosting its dividend, GE may spend some of its cash on “bolt-on” acquisitions that fit with existing businesses, such as Dresser Inc., which the GE Energy unit agreed to buy for about $3 billion in October. GE said it would buy Clarient Inc. for about $580 million the same month to add molecular diagnostics for cancer to its health-care business.

“GE’s financial profile and cash generation is supportive of the dividend increase, and thusly, we would not expect any credit-rating activity from the action,” said Joel Levington, who oversees corporate credit at Brookfield Investment Management in New York. He had projected an increase of 3 cents.

GE cut its shareholder payout from $1.24 a year in February 2009, saying the move would save about $9 billion a year as the global recession and credit crunch drained profit from the finance unit.

In March of the same year, Standard & Poor’s Ratings Services trimmed the company’s credit ratings to AA+ from AAA, the highest available. Moody’s Investors Service followed the same month with a reduction to Aa2 from Aaa, its highest.

To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

Share on Facebook

Confidence among U.S. consumers increased more than forecast in December to the highest level in six months at the same time Americans began stepping up holiday spending.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 74.2 from 71.6 at the end of November. Economists projected a December reading of 72.5, according to the median estimate in a Bloomberg News survey.

The increased optimism may be tied to rising stock prices and an agreement between President Barack Obama and Republicans to keep tax rates from rising next year. Higher confidence is being reflected in increased holiday sales that are benefiting retailers such as Target Corp.

Expectations are “a good indication of where the consumer is going to be in the new year,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “Two months in a row of increased sentiment is definitely more hopeful.”

Forecasts in the Bloomberg survey of 67 economists ranged from 69 to 76.5. The sentiment index averaged 89 in the five years leading up to the recession that began in December 2007.

Stocks were little changed and Treasury securities fell after the report. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,233.15 at 10:16 a.m. in New York. The yield on the 10-year Treasury note, which moves inversely to price, increased to 3.26 percent from 3.21 percent late yesterday.

January 2008

The survey’s measure of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, increased to 85.7, the highest since January 2008, from 82.1 a month earlier.

Consumer expectations for six months from now, which more closely projects the direction of consumer spending, increased to a six-month high of 66.8 from 64.8, today’s confidence report showed.

Higher stock prices and signs tax rates will be kept from increasing may have lifted Americans’ spirits. The S&P 500 has gained 4.5 percent since the end of November and is up 11 percent this year.

Obama’s agreement this week to prolong income-tax cuts put in place by former President George W. Bush may raise gross domestic product next year by as much as half a percentage point, to about 3.1 percent, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.

Inflation Expectations

Consumers in today’s survey said they expect an inflation rate of 2.9 percent over the next 12 months, compared with 3 percent projected in November. Over the next five years, the figures tracked by Federal Reserve policy makers, Americans expect a 2.7 percent rate after a 2.8 percent rate projection last month.

U.S. central bankers have their final policy meeting of 2010 on Dec. 14 and are likely to reaffirm their strategy to purchase $600 billion in Treasury securities by June to help bolster an economy restrained by joblessness.

Unemployment rose to 9.8 percent last month, the highest since April and close to a 26-year high, Labor Department figures showed Dec. 3. The economy generated 39,000 jobs in November after 172,000 a month earlier, indicating companies lack the appetite to expand their payrolls.

Limited job growth helps explain why retailers such as Target, Limited Brands Inc. and Costco Wholesale Corp. have used discounts to bring in shoppers, particularly during the Thanksgiving weekend. Results of their efforts show sales increased more than analysts estimated in November.

December Sales

The National Retail Federation forecast November to December sales will rise by 2.3 percent from the same time in 2009, making it the best holiday shopping season in four years. The ICSC said it expects December sales to rise as much as 3.5 percent compared with last year.

Teen retailer Abercrombie & Fitch Co. reported a 22 percent increase in November sales at stores open at least a year, while J.C. Penney Co., the third-largest U.S. department store chain, said sales climbed 9.2 percent. The holiday season “has gotten off to a strong start,” Plano, Texas-based J.C. Penney said in a Dec. 2 statement.

Home Depot Inc., the world’s largest home-improvement retailer, increased its full-year profit forecast on stronger fourth-quarter demand for plumbing and electrical items and Christmas trees.

“As we look at November into December, we see strength across the store,” Chief Financial Officer Carol Tome said Dec. 8 by telephone from an analysts’ meeting in Boston.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz cwellisz@bloomberg.net

Share on Facebook