AT&T sinks after it says it will slash annual dividend 47% following WarnerMedia spinoff
- AT&T stock fell 6% on Tuesday after the company said it would nearly halve its annual dividend.
- The telecom giant announced the plans in conjunction with a spinoff of its WarnerMedia assets, which include HBO.
- AT&T will receive $43 billion from the planned spinoff, which will combine with
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AT&T stock fell as much as 6% on Tuesday after investors reacted to news that the telecom giant would slash its closely watched annual dividend by 47%.
The move comes in conjunction with plans to spin off WarnerMedia as part of the division's merger with Discovery. AT&T will receive about $43 billion from the spinoff, and shareholders will own 71% of the newly combined media company. AT&T had originally acquired Time Warner for $85 billion in 2018, which gave it ownership of HBO, among other media properties.
But what investors really care about is the dividend. AT&T has always been known for its sky-high dividend yield, and many retail investors relied on it for income. AT&T currently pays an annual dividend of $2.08 per share, giving it a yield of 8.2% as of Monday.
But by shedding WarnerMedia, management viewed its current dividend payout as unsustainable. AT&T will now pay an annual dividend of $1.11 per share, giving it a dividend yield of 4.3% based on Monday's close. AT&T hasn't had a dividend yield that low since early 2018, according to data from Koyfin.
"In evaluating the form of distribution, we were guided by one objective: executing the transaction in the most seamless manner possible to support long-term value generation. We are confident the spinoff achieves that objective because it's simple, efficient and results in AT&T shareholders owning shares of both companies, each of which will have the ability to drive better returns in a manner consistent with their respective market opportunities," AT&T CEO John Stankey said.
Once the deal closes, AT&T shareholders will receive 0.24 shares of the new
Warner Bros. Discovery will trade on the Nasdaq under the ticker symbol "WBD" once the merger closes, which is expected to happen in the second quarter.
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