What happened with AT&T (T)? Well, the company currently has two large businesses housed under one roof. A telecom business. And a media business.

Media is being spun off as a new independent business to shareholders next year. So AT&T investors will still basically own the same stuff but through two separate companies.

A separate media company - Discovery - is going to merge with the new media spin-off, but that's really a small part of this story.

You'll still have the exciting 5G exposure on one side and the exciting streaming exposure on the other. It'll just be packaged differently.

Since the media assets produce a lot of cash flow, the legacy AT&T - the remaining telecom business - will be cutting its dividend after the spin-off completes.

We're talking about a dividend cut of somewhere between 40% and 50%.

Ouch.

However, the media business may pay a dividend of its own, greatly reducing the overall income loss. And if the new business doesn't pay an attractive dividend, investors can simply sell the shares and buy something else that does.

In the end, I don't think current AT&T shareholders are looking at a massive dividend cut after it's all said and done. Certainly not the prevailing 50% headline number.

Moreover, both businesses could get valuation bumps, as AT&T has long been in the doldrums in this respect.

If you sell AT&T stock and move your money into something lower-yielding, then you're still locking in a reduction in income. Now, it's never nice to experience any loss in passive income, so I understand the frustration.

What can we learn from this? Two important lessons come to mind. Both of which I've been consistently repeating over and over again here at the channel. I think this situation is a good opportunity to review both of them.

The first lesson is on the importance of diversification.

I can't repeat it enough. If you're needlessly concentrating on a couple dozen or so stocks, you're taking on unnecessary risk and volatility. That is silly.

We put together a video earlier this month discussing why I own over 100 stocks in my own portfolio. Please watch it if you haven't already.

It's situations like this that prove out how important that level of diversification is.

I've personally heard from retired investors who have 10% or more of their portfolios in AT&T stock alone because of the big dividend that helps them to cover their bills.

I've said time and time again how I think it's so important to avoid that level of concentration. These retirees are now in a tough spot. And I feel for them. I really do. Because now they're faced with limited options in order to keep their income fully intact without totally revamping their portfolios and/or taking on even more risk.

But if AT&T is, say, 1% of your portfolio, this is a non-news event.

If 30% of your income from something that's 1% of your portfolio suddenly disappears, it's kind of a non-issue. We're talking about maybe half a percentage point of income after factoring in the disproportionate yield. If you've built up a broadly diversified portfolio of high-quality dividend growth stocks, the other stocks in your dividend growth stock portfolio should be busy stabilizing things with dividend raises of their own, quickly erasing this income loss and balancing you back out.

The situation with AT&T is, in my view, not exactly earth-shattering. The company isn't going bankrupt. The stock isn't going to $0, nor is the dividend being completely eliminated. The company is simply splitting into two through a spin-off, which is actually quite a common event. It's the reduction in the overall dividend payout that is less common and unfortunate.

While being of little consolation to longtime AT&T shareholders today, the stock will, ironically, in many ways, be a lower-risk investment after the spin-off and dividend cut are done. But this situation is an opportunity to learn and grow as an investor, with these two lessons being especially valuable and germane.

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