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AT&T/ Discovery merger and T dividend
Old 05-17-2021, 10:14 AM   #1
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AT&T/ Discovery merger and T dividend

I hold a decent amount of T and so was interested to read todayís announcement of a merger with Discovery. There are also articles covering T and Warner and how that will be affected.

It sounds like a dividend cut is in store for T. I think it was pretty lofty and expect to continue holding T as everything shakes out over the next year or so.
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Old 05-17-2021, 10:27 AM   #2
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My BIL's retirement income is substantially AT&T as that was his former employer. I took a look at that stock a couple of years back and concluded that their profits didn't support the dividend. I wish my BIL the best.
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Old 05-17-2021, 10:29 AM   #3
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My BIL's retirement income is substantially AT&T as that was his former employer. I took a look at that stock a couple of years back and concluded that their profits didn't support the dividend. I wish my BIL the best.
would the merger change the profits and therefore your conclusion?
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Old 05-17-2021, 10:35 AM   #4
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I hold a decent amount of T and so was interested to read todayís announcement of a merger with Discovery. There are also articles covering T and Warner and how that will be affected.

It sounds like a dividend cut is in store for T. I think it was pretty lofty and expect to continue holding T as everything shakes out over the next year or so.
I also thought that the dividend resizing meant a cut! But if they reduce their outstanding debt load with a significant chunk of the $43B they get from the spin-off plus the ongoing "profits" from retaining a 71% ownership of the "new" company wouldn't that reduce their payout ratio without a dividend cut?
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Old 05-17-2021, 12:44 PM   #5
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I was expecting a big bump up and that's how the morning started, almost 4% up, but now at 2:45 EDT, T is down 0.93%.
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T Divy Cut
Old 05-17-2021, 01:44 PM   #6
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T Divy Cut

Mid 2022 expected date of Media Spinoff for T. Annual Div maybe down to $1.16?
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Old 05-17-2021, 02:19 PM   #7
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Analysis I've seen is that dividend to be 20-23% of EBITDA, so approx 80 cents, down from $2.08.
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Old 05-17-2021, 02:28 PM   #8
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Who knows what may happen to Tís price by then (not me!)?

Time Warner paid a small dividend once upon a time, I think Discovery pays none.
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Old 05-17-2021, 02:34 PM   #9
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Cramer is talking about a dividend cut from ~$15B/yr to ~$8B. Not clear where he got those numbers or what he's basing that assumption on.

https://www.thestreet.com/investing/...y-media-merger

I own T solely for the dividend. (Let's face it..1.57% 5-year trailing return or ~5%/avg annual 10 and 15-year returns is nothing to get excited about). If Cramer's right, that'd be a 46.67% dividend cut, or approximately $2.08/sh (now) to $1.11/sh.

No way I'm going to continue to hold T with that kind of cut. I'm just not excited enough about their business or future prospects to do so and held the stock purely for the income.

Sure hope other "Telco" businesses like LUMN (which I hold a significantly larger amount of) don't get any bright ideas as a result of this. I suspect T is going to get reasonably hammered in trading as a result. LUMN has even less of a compelling story than T, so if they were to follow suit..look out below on the share price.
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Old 05-17-2021, 02:50 PM   #10
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The euphoria wore off quickly for DISCA. Pre-market up big, then just run off throughout the day, closing $1.80 (5.5%) from Friday's close.

DISCA-DISCOVERY-INC-COM-SER-A.png

T also closed below Friday's close. Seems people sharpened their pencils and didn't like what they saw.
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Old 05-17-2021, 02:52 PM   #11
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Cramer is talking about a dividend cut from ~$15B/yr to ~$8B. Not clear where he got those numbers or what he's basing that assumption on.

No way I'm going to continue to hold T with that kind of cut. I'm just not excited enough about their business or future prospects to do so and held the stock purely for the income.

My guess is that there is a very large percentage of shareholders who are with them only for the dividend. I'd have to assume there is huge pressure to keep the dividend. IMO there's a 50/50 chance of them keeping it as is.
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Old 05-17-2021, 02:59 PM   #12
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Media talking heads are going to affect daily movement on days like this. I think itís better to take a wait and see.
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Old 05-17-2021, 03:14 PM   #13
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Looks like it's AT&T management that's saying they will cut the dividend to 40-43% of estimated $20B cash flow. That's apparently where the ~$8B payout (down from $15B payout) number is coming from.

https://www.kiplinger.com/investing/...inoff-dividend

I'm out at the first opportunity to sell at a decent price. And since many investors hold T purely for the dividend, I'd expect a mini stampede of sellers..
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Old 05-17-2021, 03:45 PM   #14
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Looks like my Call options at $32 are now safe

Dang, I was thinking this was a good thing to hold purely for the dividend, didn't even care if the price stuck at $29.
7% in today's market is sweet, and just expecting the price to hold is not too hard.

Can't believe all the bone-head moves AT&T does every time they buy/sell some acquisition.
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Old 05-17-2021, 03:56 PM   #15
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Looks like my Call options at $32 are now safe

Dang, I was thinking this was a good thing to hold purely for the dividend, didn't even care if the price stuck at $29.
7% in today's market is sweet, and just expecting the price to hold is not too hard.

Can't believe all the bone-head moves AT&T does every time they buy/sell some acquisition.
Totally agree. This move would also knock them off of the Dividend Aristocrats list. What kind of bone headed move is THAT?

It's almost like LUMN (formerly Century Link) trying to re-brand themselves as a "tech growth company". These are not growth or tech companies. They're telcos. Albeit, both with a heck of a lot of fiber backbone. But they're still telcos. And people hold telcos for the dividend (largely). Jeesh.
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Old 05-17-2021, 04:56 PM   #16
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I had been thinking about buying T the last week for the divi... glad that my waiting around paid off this one time...
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Old 05-17-2021, 05:02 PM   #17
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Guess I've also learned my lesson on buying individual divvy stocks (T, LUMN, O, WELL) and instead should stick with dividend paying funds or ETFs like SCHD..

Now, if SCHD would quit going vertical, I could get a chance to buy a little more..
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Old 05-17-2021, 05:04 PM   #18
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I've been playing a little with holding common and writing calls, glad they were called away. Not writing cash covered puts at this time on it either. Too many hold this thing only for the dividend.

Been watching LUMN for the dividend but I'm forced to be their customer and would cut ties with them in an instant if I could. Surely others will too? They recently restructured and reduced the unmaintainable payments. Still not sure I'll put anything significant there.
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Old 05-17-2021, 05:22 PM   #19
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Verizonís yield is around 4-1/3% right now. Maybe AT&T would be good to return to around that level.

I think thereís not enough solid information to come to any conclusions immediately. Mostly I think the move is to pare down to core business (not content).
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Old 05-17-2021, 05:35 PM   #20
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Verizon’s yield is around 4-1/3% right now. Maybe AT&T would be good to return to around that level.

I think there’s not enough solid information to come to any conclusions immediately. Mostly I think the move is to pare down to core business (not content).
I'm actually considering selling T and dumping the proceeds into VZ to increase my currently small holdings in that. Probably not the most well thought out plan, but "feels" right at the gut level.
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