AT&T Stock Analysis - AT&T Dividend Cut - is AT&T’s Stock a Good Buy Today? | Summary and Q&A

TL;DR

AT&T recently announced a deal with Discovery to combine their WarnerMedia division, potentially creating a new company that can compete with streaming giants like Netflix. The deal also includes a dividend cut for AT&T shareholders.

Key Insights

• 🪛 Communications is the main revenue driver for AT&T, accounting for about 80% of their total revenue.
• 🤝 The deal with Discovery aims to create a new company with increased offerings and the ability to compete in the streaming industry.
• 🥶 AT&T's dividend will be reduced after the deal is completed, with a projected payout of 40-43% of free cash flow.
• ❓ Uncertainty remains regarding how AT&T will address their debt situation in the spin-off and the potential impact on shareholders.
• 🔬 Investors may choose to wait and see how the spin-off and dividend changes unfold before considering investing in AT&T.
• 🖤 The deal with Discovery has received mixed reactions, with concerns about the significant dividend cut and the lack of clarity on debt management.
• 👶 The fair value of AT&T stock, accounting for the spin-off, is estimated to be around $7.50 per share for the new company and $22.50 per share for AT&T.

Transcript

hi i'm jimmy in this video we're going to look at att stock ticker symbol t so we're going to run through the basics of att's business and then we'll dive into the big news with at t recently and that is their recent deal with discovery their pending dividend cut and finally we'll see if we can come up with a fair value for att stock using discount... Read More

Questions & Answers

Q: What is the main focus of AT&T's revenue?

AT&T's revenue is mainly driven by their communications segment, which includes mobile, wireline, and broadband services.

Q: What is the significance of the deal with Discovery for AT&T?

The deal with Discovery aims to combine AT&T's WarnerMedia division with Discovery to create a new company that can compete against streaming giants like Netflix.

Q: How will the deal affect AT&T's dividend?

As a result of the deal, AT&T plans to reset its dividend. After the deal is completed, they plan to pay out between 40% and 43% of their estimated $20 billion in free cash flow in 2022.

Q: What is the fair value of AT&T stock?

Using the discounted cash flow method, the fair value of AT&T's entire business is estimated to be around $60 per share. Taking into account their large debt holdings, the adjusted fair value is around $33 per share.

Summary & Key Takeaways

• AT&T's revenue in 2020 was largely dominated by their communications segment, consisting of mobile, wireline, and broadband services. Their smallest segment is their Latin America division.

• WarnerMedia, which includes HBO and Warner Bros., is a significant division for AT&T. The deal with Discovery aims to combine the two companies and create a new business with a stronger market presence.

• As part of the deal, Discovery shareholders will receive 29% ownership in the new company, while AT&T shareholders will own the remaining 71%.