AT&T CEO says dividend cut not needed to fund progress, touts HBO Max’s upcoming ad-supported option

 AT&T CEO John Stankey advised CNBC on Friday the corporate can keep its dividend cost whereas nonetheless investing in progress companies like direct-to-consumer streaming service HBO Max.

Stankey made within the feedback on “Squawk on the Street” in response to a query from CNBC’s David Faber, who requested the CEO if cash AT&T used to pay the dividend can be higher spent accelerating its digital transformation.

That’s a binary selection AT&T does not have to make proper now, Stankey responded.

“I feel very comfortable when we’re down at 50, low 50s, mid 50 payout ratios on the dividend, that we can sustain that right now and not have to walk away from the opportunity to keep this a strong and sustainable business,” mentioned Stankey, showing on CNBC as AT&T’s host its Analyst and Investor Day.

“The moment that I cross a path where I don’t think that can happen, or that we’re not getting recognized for that capital return, of course I’ve got to ask that question,” Stankey added. “But we’re not in that position.”

AT&T paid out $15 billion in dividends in 2020 whereas producing $27.5 billion in free money circulation, placing the corporate’s whole dividend payout ratio at 55%, in accordance to its Jan. 27 earnings launch. For the upcoming 12 months, the corporate tasks free money circulation to be within the $26 billion vary and its dividend payout ratio to be within the “high 50’s% range.”

AT&T had a dividend yield of round 6.8% on Friday as its shares traded at greater than $30 every.

Stankey mentioned he is assured AT&T will probably be ready to develop its revenues going ahead. Revenue got here in at $171.Eight billion in 2020, a 12 months upended by the coronavirus pandemic, in contrast with $181.2 billion in 2019.

“Our belief is we’ve got the portfolio of growth,” Stankey mentioned, including the corporate was deploying its “time and energy … in a way that we think we can be successful in those markets and return this business to top-line growth.”

HBO Max, which is a part of AT&T’s WarnerMedia division, is a key focus for the corporate.

Stankey mentioned he sees causes to be optimistic and believes new subscribers will proceed to flock to the streaming service.

AT&T on Friday elevated its subscriber forecast for HBO Max and HBO, projecting international subscribers of between 120 million and 150 million for HBO Max and HBO by the tip of 2025. At the tip of fiscal 12 months 2020, international subscribers reached practically 61 million for HBO Max and HBO and U.S. subscribers 41 million, aided by the Christmas Day launch of “Wonder Woman 1984.”

“We grew more in the last seven months of last year than we did in the previous decade,” Stankey mentioned.

The firm is planning to launch HBO Max in Latin America and later Europe, he mentioned. “Add to that the exciting development of bringing in an ad-supported option for customers [in June], which broadens the opportunity domestically in the United States to start attacking price points that we’ve been locked out of,” he mentioned. “The team feels really good about their momentum. We haven’t seen our best days.”

AT&T’s new forecast comes as Netflix just lately surpassed 200 million subscribers through the fourth quarter of 2020, and and Disney’s streaming service Disney+ surpassed 100 million subscribers simply 16 months after its launch.

Stankey additionally mentioned he is happy with the latest efficiency of WarnerMedia’s Turner division, which incorporates the likes of TNT and CNN. The latter is coming of a “record year, record ratings, record revenue,” he mentioned.

“We have very capable people who have done a nice job positioning those assets to even be relevant in what I would call that shrinking dynamic of the cable bundle — not only shrinking from a subscriber base but shrinking in terms of the number of channels that are relevant for a customer to carry forward,” he mentioned.

— CNBC’s Sarah Whitten contributed to this report.

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