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


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.

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

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