Up until recently, AT&T (NYSE:T) shares traded in an uptrend. Investors could count on a stock that paid a yield of around 6% in dividends. But after the fall from $32 to below $30, the yield is in the 7% range.
Why is T stock on sale?
AT&T announced it would spin off its WarnerMedia unit with Discovery (NASDAQ:DISCA). This unwinds years of consolidation in content and wireless plus cable. Investors will get the studio and streaming unit with Discovery, they will get a lower dividend after the spinoff. The stock now reflects the destruction of shareholder value.
Investors are confused with why the telecom giant wants to separate the content business. The core wireless and cable business are not growing. Cash flow is steady, too. The company may have grown increasingly worried about the massive debt accumulation. Instead of paying down debt and interest payments through cash flow, the spinoff simplifies the overall business structure.
Your Takeaway
The timing of the spinoff is unusual. AT&T could benefit from movie theatre attendance rebounding. Each of the box office hits could add billions in revenue. Investors who still want exposure to the streaming sector could look instead at Disney (NYSE:DIS) and Roku (NASDAQ:ROKU). Verizon (NYSE:VZ) stock is inexpensive, too. Its Yahoo unit sale lost money. Still, Verizon did not lose as much as AT&T did on the acquisition.
