AT&T CEO John Stankey told CNBC on Friday that the company can maintain its dividend payout while still investing in growing businesses, such as the HBO Max direct-to-consumer streaming service.
Stankey made comments on “Squawk on the Street” in response to a question from CNBC’s David Faber, who asked the CEO whether the money AT&T used to pay dividends would be better spent on accelerating its digital transformation.
This is a binary choice that AT&T does not have to make now, Stankey replied.
“I feel very comfortable when we are at 50, 50, 50 and 50 dividend payment rates, that we can sustain this now and not have to shy away from the opportunity to keep this a strong and sustainable business,” said Stankey, appearing on CNBC as the host of AT&T, its Analyst and Investor Day.
“The moment I cross a path where I don’t think it can happen, or that we won’t be recognized for that return on capital, it’s clear that I have to ask this question,” added Stankey. “But we are not in that position.”
AT&T paid $ 15 billion in dividends in 2020, while generating $ 27.5 billion in free cash flow, putting the company’s total dividend distribution index at 55%, according to the earnings release. January 27th. For the next year, the company projects free cash flow in the range of $ 26 billion and its dividend payment rate in the “high 50% range.”
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 revenues in the future. Revenue stood at $ 171.8 billion in 2020, a year in which the coronavirus pandemic increased, compared to $ 181.2 billion in 2019.
“We believe we have the growth portfolio,” said Stankey, adding that the company was using its “time and energy … in a way that we think we can succeed in those markets and return this business to the top. Growth of the line.”
HBO Max, which is part of AT&T’s WarnerMedia division, is the company’s primary focus.
Stankey said he sees reasons to be optimistic and believes that new subscribers will continue to migrate to the streaming service.
AT&T on Friday increased its subscriber forecast for HBO Max and HBO, projecting global subscribers between 120 million and 150 million for HBO Max and HBO by the end of 2025. At the end of fiscal year 2020, global subscribers reached nearly 61 million for HBO Max and HBO and 41 million subscribers in the US, helped by the release of “Wonder Woman 1984” on Christmas Day.
“We grew more in the last seven months of last year than in the previous decade,” said Stankey.
The company plans to launch HBO Max in Latin America and then in Europe, he said. “Add to that the exciting development of bringing an ad-supported option to customers [in June], which expands the domestic opportunity in the United States to start attacking price ranges that we haven’t seen, “he said.” The team feels very good about its momentum. We haven’t seen our best days. “
AT&T’s new forecast comes when Netflix recently surpassed 200 million subscribers during the fourth quarter of 2020, and the Disney Disney + streaming service surpassed 100 million subscribers just 16 months after its launch.
Stankey also said he is pleased with the recent performance of WarnerMedia’s Turner division, which includes names like TNT and CNN. The latter comes from a “record year, record audience, record revenue,” he said.
“We have very capable people who have done a good job of positioning these assets to be relevant in what I would call the cable package shrinkage dynamic – not just shrinking from a subscriber base, but shrinking in terms of the number of channels that are relevant to a customer to take forward, “he said.
– CNBC’s Sarah Whitten contributed to this report.