AT&T Stock: Should I Sell, Reduce Position Or Hold?!

As we all have heard the AT&T (T) news that dropped on May 17th, AT&T is spinning off WarnerMedia to merge with Discovery, to create a massive organization in Entertainment.

Low Angle View of Clock Tower Against Sky

Pexels

The stock market instantly loved it, for only a few hours.  The stock price has shuttered due to the devastating dividend news of AT&T having to reduce their dividend?  In this article, I will list out the options I, and many of us, have on the table.  The question has consistently been, do you sell your AT&T stock, now?

AT&T and the WarnerMedia, Discovery Entity

The deal, combines the WarnerMedia division of AT&T, which includes HBO Max, TNT, TBS, WB, CNN, Cartoon Network and DC to name a few; with Discovery Plus.  What does Discovery Plus include?  Discovery includes the Food Network, HGTV, TLC, History and Lifetime.  This is one content heavy and media producing company.

This is a $43B deal, with AT&T receiving $43B.  The $43B is going to be composed of cash, debt securities in the new entity and retention of AT&T’s.  This will absolutely reduce AT&T’s debt and interest payments.

Then, AT&T Shareholders will receive 71% of the combined entity, with Discovery’s (DISCA) shareholders receiving 29%.  This shall be interesting.  This should close in mid-2022 and the new entity is expected to have $53B in revenue with $14B in adjusted EBITDA.

Now, then there was the not so great news for dividend growth investors and that has to do with AT&T (T) and their dividend, of course.  We have all heard and read the news…

AT&T’s Dividend Cut or Dividend Reduction

 

I know AT&T shareholders were curious what the dividend payout will be.  AT&T plans to have expected free cash flow (FCF) of around $20B and they want the payout ratio, based on FCF, to be at 40-43% or around $8B on over 200 million shares outstanding.

Currently, AT&T uses around $15B of cash flow on their dividend.  Therefore, this is reduced by ~47%.  AT&T currently pays $2.08 per year and one could/should anticipate, come next year, summer time, the annual dividend will be somewhere around $1.08 to $1.12, but more than likely $1.10/$1.11.

1 2 3
View single page >> |

Disclaimer: I do not recommend any decision to the reader or any user, please consult your own research. Thank you.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.