AT&T CEO John Stankey told CNBC on Friday that the company can keep paying its dividends while investing in growing businesses such as direct-to-consumer streaming service, HBO Max.
Stankey commented on “Squawk on the Street” in response to a question from CNBC’s David Faber, who asked the CEO if AT&T’s regular dividend money would be better spent speeding up its digital transformation.
This is a binary choice that AT&T should not make right now, Stankey replied.
“I feel very comfortable when we are at 50, 50 years low, 50 percent dividend payment, that we can support this right now and we must not stray from the opportunity to keep this business strong and sustainable,” he said. said Stankey, appearing on CNBC as the host of AT&T, Analyst and Investor Day.
“The moment I cross a path where I don’t think it can happen or we are not recognized for that return on capital, of course I have to ask that question,” Stankey added. “But we’re not in that position.”
AT&T paid $ 15 billion in dividends in 2020, while generating a free cash flow of $ 27.5 billion, bringing the company’s total dividend payment ratio to 55%, according to its revenue statement of 27 January. For next year, the company projects that the free cash flow will be in the range of 26 billion dollars, and its dividend payment ratio will be in the “high range of 50%”.
AT&T had a dividend yield of about 6.8% on Friday, with its shares trading at more than $ 30 each.
Stankey said he is confident that AT&T will be able to increase its revenue in the future. Revenue amounted to $ 171.8 billion in 2020, a one-year increase in the coronavirus pandemic, compared to $ 181.2 billion in 2019.
“Our belief is that we have a growth portfolio,” Stankey said, adding that the company is running its time and energy … in a way that we believe we can succeed in those markets and bring this business back to the beginning – growth line. “
HBO Max, part of AT & T’s WarnerMedia division, is a key point for the company.
Stankey said he sees reasons to be optimistic and believes new subscribers will continue to participate in the streaming service.
AT&T increased its subscriber forecast for HBO Max and HBO on Friday, projecting global subscribers between 120 and 150 million for HBO Max and HBO by the end of 2025. By the end of fiscal 2020, global subscribers reached nearly 61 million for HBO Max and HBO and US subscribers 41 million, helped by the launch of “Wonder Woman 1984” on Christmas Day.
“We’ve grown more in the last seven months of last year than we did in the previous decade,” Stankey said.
The company plans to launch HBO Max in Latin America and later in Europe, he said. “Add to this the exciting development of bringing an advertising option for customers [in June], which expands the opportunity domestically in the United States to begin attacking the price points from which we were blocked, “he said.” The team feels very good about their drive. We didn’t see each other’s best days. “
AT & T’s new forecast comes as Netflix recently surpassed 200 million subscribers in the fourth quarter of 2020, and Disney’s Disney + streaming service surpassed 100 million subscribers in just 16 months since its launch.
Stankey also said he is pleased with the recent performance of WarnerMedia’s Turner division, which also includes TNT and CNN. The latter comes with a “record year, record ratings, record revenue,” he said.
“We have very capable people who have done a great job positioning those assets to be really relevant in what I would call that dynamic reduction of the cable package – not only is it shrinking from a subscriber base, but also in terms of it concerns the number of channels that are relevant for a customer to continue, “he said.
– Sarah Whitten of CNBC contributed to this report.