What happened
Actions of ATT (NYSE: T) rose on Friday after the telecommunications leader boosted its growth forecast for HBO and reiterated its commitment to its dividends. As of 3:35 pm EST, the price of AT&T shares rose more than 1%, after rising 4.5% earlier in the day.
And
AT&T now expects to have a total of 120 million to 150 million subscribers to HBO Max and HBO by the end of 2025. This represents a huge increase from the previous estimate of 75 million to 90 million issued in October 2019.
AT&T said that international expansion and a new advertising version of its streaming service HBO Max will help increase its subscriber earnings. The telecom plans to launch HBO Max in 60 markets outside the United States this year.
Investors liked what they heard from the AT&T leadership team on Friday. Image source: Getty Images.
During an interview with CNBC, CEO John Stankey said that AT&T can maintain its considerable dividends even when it invests in its growth initiatives. He expects the company’s dividend payments to represent less than 60% of its $ 26 billion in projected free cash flow in 2021. “We can sustain this now and not have to miss the opportunity to keep this a strong and sustainable business, “Stankey said.
AT&T shares currently offer investors a robust 7% return.
What now
Like other streaming service providers, AT&T saw its subscriber growth accelerate during the coronavirus pandemic, as people sought safer and cheaper home entertainment options. Stankey, for his part, made the wise decision to divest underperforming segments of AT&T’s business, such as its difficult DIRECTV operations, to better focus the company on its streaming opportunity.
AT&T will also prioritize the payment of debt over share repurchases, which should help to further strengthen its cash flow generation, as well as its ability to continue to reward its investors with broad dividend payments.
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