AT&T Sets WarnerMedia Spinoff Plan and Lowers Its Dividend
AT&T Inc.
said it would roughly halve its dividend payout and divest its WarnerMedia division through a spinoff that will give shareholders 0.24 share for each AT&T share they own, a move that would complete its retreat from the entertainment business.
The spinoff is part of AT&T’s planned deal to combine WarnerMedia with
Discovery Inc.,
a merger that is expected to close in the second quarter. AT&T plans to use the transaction to refocus its remaining assets on its core telecom operations.
After the spinoff, AT&T said it expects to pay an annual per-share dividend of about $1.11, down from its most recent $2.08 level. The new payout would cost the company just under $8 billion a year, down from the roughly $15 billion it paid out in 2021.
AT&T is one of the most widely held U.S. stocks, and the company has historically offered one of the largest regular dividend payouts on the market. Based on Monday’s closing price, it had an 8.16% dividend yield. By comparison, rival
had a dividend yield of 4.81% based on Monday’s prices.
Shares of AT&T fell about 4% in trading Tuesday afternoon to around $24. The stock has lost about a third of its value since AT&T agreed to buy Time Warner Inc. in October 2016, while the S&P 500 index has doubled in the same period.
AT&T said the change accounts for the media-asset distribution and supports the telecom company’s plans to boost investment in 5G wireless and fiber-optic service. Reducing the size of the dividend will also allow the business to more quickly whittle down debt. The company has said it would remain one of corporate America’s highest dividend-yield payers after the spinoff.
Executives had said they would cut the dividend to reflect the company’s smaller size once the media business is carved out into a separate company. The stand-alone telecom company stands to get about $43 billion in cash from the transaction, subject to certain adjustments.
HBO Max’s show ‘Hacks.’ WarnerMedia’s HBO unit recently reported 73.8 million world-wide streaming subscribers.
Photo:
Anne Marie Fox/Associated Press
AT&T had until recently projected a dividend payout between $8 billion and $9 billion, a figure based on the free cash flow it expected to generate in the coming years.
Craig Moffett,
an analyst for media and telecom…
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