AT&T CEO John Stankey told CNBC on Friday that the company can maintain its dividend payment while still investing in growth businesses such as the direct-to-consumer streaming service HBO Max.
Stankey said in a comment on ‘Squawk on the Street’ in response to a question from David Faber of CNBC, who asked the CEO if money that AT&T used to pay the dividend could have been better spent on the accelerate digital transformation.
This is a binary choice that AT&T does not have to make right now, Stankey replied.
“I feel very comfortable when we have on the dividend 50, lower 50s, mid 50 payout ratios, that we can sustain it now and not have to walk away from the opportunity to keep it a strong and sustainable business,” says Stankey and appeared on CNBC as AT & T’s host for its Analyst and Investor Day.
“The moment I cross a path where I do not think it can happen, or that we are not recognized for the return on capital, I must of course ask the question,” Stankey added. “But we are not in that position.”
AT&T paid out $ 15 billion in dividends in 2020, while generating $ 27.5 billion in free cash flow, which set the company’s total dividend payout ratio at 55%, according to January 27 earnings. For the coming year, the company plans for free cash flow to be within the $ 26 billion range and for its dividend payouts to be in the ‘high 50 percentage point’ range.
AT&T achieved a dividend yield of about 6.8% on Friday as it traded its shares at more than $ 30 each.
Stankey said it was confident that AT&T would be able to increase its revenue going forward. Revenue was $ 171.8 billion in 2020, a year increased by the coronavirus pandemic, compared to $ 181.2 billion in 2019.
“We believe we have the portfolio of growth,” Stankey said, adding that the company spends its “time and energy … in a way that we think we can be successful in those markets and put this business back on track. top can give. line growth. “
HBO Max, part of AT & T’s WarnerMedia division, is a key focus for the company.
Stankey said he sees reasons to be optimistic and believes new subscribers will continue to flock to the streaming service.
AT&T increased its subscriber forecast for HBO Max and HBO on Friday, with global subscribers forecasting between 120 million and 150 million for HBO Max and HBO by the end of 2025. At the end of the fiscal year 2020, global subscribers had nearly 61 million for HBO, Max and HBO and US subscribers reach 41 million, aided by the release of Wonder Woman 1984 on Christmas Day.
“We’ve grown more in the last seven months of last year than in the previous decade,” Stankey said.
The company plans to launch HBO Max in Latin America and later Europe, he said. Add to that the exciting development to introduce an ad-supported option for customers [in June]”which broadens the opportunity within the United States to address price points to which we are excluded,” he said. The team feels really good about their momentum. We have not seen our best days yet. ‘
AT & T’s new forecast comes as Netflix recently surpassed 200 million subscribers in the fourth quarter of 2020, and Disney’s streaming service Disney + exceeded 100 million subscribers just 16 months after its launch.
Stankey also said he was pleased with the recent performance of WarnerMedia’s Turner division, which includes TNT and CNN. The latter comes from a ‘record year, record ratings, record revenue’, he said.
“We have very capable people who have done a good job of placing those assets to be even relevant to what I would call the shrinking dynamics of the cable bundle – not just from a subscriber base, but also shrinking in terms of the number of channels relevant for a customer to continue, ‘he said.
Sarah Whitten of CNBC contributed to this report.