AT&T‘s sharp dividend cut freed up cash that can be utilized to enhance the firm’s outcomes, CEO John Stankey advised CNBC on Friday.
“I’d a lot fairly be pouring a few of that cash back into the infrastructure of this business to [generate] returns at a better stage than what we pay out on the dividend. So it is time to make that transition for this firm,” Stankey stated on “Squawk Box” from the AT&T Pebble Beach Pro-Am golf event in California.
AT&T on Tuesday cut its annual dividend practically in half to $1.11 per share, as the firm announced it will spin off WarnerMedia in a $43 billion deal that may merge its media properties with Discovery. AT&T’s shares tumbled 4% p.c the similar day. The inventory rose modestly Wednesday and Thursday however dropped more than 1.5% on Friday.
“I feel there was a little bit little bit of adjustment that went on as soon as the dividend numbers settled in,” Stankey stated. “We had not determined whether or not we have been going to spin or cut up, we could not state a dividend quantity.”
AT&T expects the WarnerMedia spin-off to be accomplished in the second quarter of this yr. Under the merger deal, introduced final May, AT&T shareholders will personal 71% of the new Warner Bros. Discovery firm and obtain a 0.24 share of Warner Bros. Many of the monetary particulars of the transaction turned identified for the first time this week.
The mixture will carry collectively AT&T-owned CNN, HBO and the Warner Bros. studio and Discovery’s channels, together with Animal Planet, TLC and its namesake Discovery Channel.
Stankey stated that regardless of shareholders’ considerations, he expects the merger to finally carry worth to those that personal the newly-minted firm’s inventory — although not with out some volatility alongside the method.
“Look, popping out of this, they’ve a fantastic alternative. They’re gonna personal two shares and I feel each have nice prospects,” Stankey stated. “There’s going to be folks selecting sides on the place they need to go, and so we anticipate there’s going to be some days the place we see a little bit little bit of motion.”
Stankey stated the firm’s dividend yield of more than 8.5% on Friday morning stays sturdy. “Over time, intrinsic worth tends to be acknowledged by the market, and I feel there’s loads of intrinsic worth.”