AT&T CEO John Stankey told CNBC on Friday that the company can maintain its dividend payment while still investing in growth companies like the direct-to-consumer streaming service HBO Max.
Stankey commented on “Squawk on the Street” in response to a question from CNBC’s David Faber, who asked the CEO if the money AT&T used to pay the dividend could be better spent accelerating the digital transformation .
That’s a binary choice AT&T doesn’t have to make right now, Stankey replied.
“I feel very comfortable when we are at 50, low 50, mid 50 payout ratios on the dividend that we can maintain that now and not have to walk away from the opportunity to keep this a strong and sustainable company,” said Stankey, who appeared on CNBC as AT & T’s host of its analyst and investor day.
“The moment I come across a path that I think cannot happen, or that we are not recognized for that return on capital, I must of course ask that question,” Stankey added. “But we’re not in that position.”
AT&T paid out $ 15 billion in dividends in 2020 and generated $ 27.5 billion in free cash flow, bringing the company’s total dividend payout ratio to 55%, according to the January 27 earnings announcement. For the coming year, the company expects free cash flow to be in the $ 26 billion range and its dividend payout ratio to be in the “high 50% range.”
AT&T had a dividend yield of about 6.8% on Friday as the stock traded for more than $ 30 each.
Stankey said he is confident that AT&T will be able to grow its revenues in the future. Sales were $ 171.8 billion in 2020, a year turned upside down by the coronavirus pandemic, compared to $ 181.2 billion in 2019.
“We are confident we have the portfolio of growth,” said Stankey, adding that the company is “putting its time and energy… in a way that we believe we can be successful in those markets and take this company back to. can bring the top.
HBO Max, which is part of AT & T’s WarnerMedia division, is a major 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 raised its subscriber forecast for HBO Max and HBO on Friday, expecting global subscribers to be between 120 million and 150 million for HBO Max and HBO by the end of 2025. At the end of fiscal 2020, global subscribers reached nearly 61 million for HBO Max and HBO and US subscribers 41 million, aided by the release of “Wonder Woman 1984” on Christmas Day.
“We have grown more in the past seven months of last year than in the previous decade,” said Stankey.
The company plans to launch HBO Max in Latin America and later Europe, he said. Add to that the exciting development of introducing an ad-supported option for customers [in June], which increases the ability domestically in the United States to attack prices that we don’t have access to, “he said.” The team feels very good about their momentum. We haven’t seen our best days. “
AT & T’s new prediction comes because Netflix recently surpassed 200 million subscribers in the fourth quarter of 2020, and Disney’s streaming service Disney + only surpassed 100 million subscribers 16 months after launch.
Stankey also said he is satisfied with the recent performance of WarnerMedia’s Turner division, which includes TNT and CNN. The latter comes from a “record year, record numbers, record sales,” he said.
“We have very skilled people who have done a good job of positioning those assets in such a way that they are even relevant in what I would call those shrinking cable bundle dynamics – not just shrinking a subscriber base, but also in terms of the number of channels that relevant for a customer to proceed, ”he said.
– CNBC’s Sarah Whitten contributed to this report.