When AT&T (NYSE:T) posted its third-quarter results, the stock rose by nearly 6% on Oct. 22. The company alleviated investor concern by forecasting impressive cash flow. Most importantly, its dividend payout ratio will rise to the high 50% range.
HBO and HBO Max subscriptions topped 38 million. This exceeded the market’s expectations. Granted, the company may have included trial accounts, lifting the count. Still, shareholders should appreciate the telecom giant’s cash flow forecast of $26 billion or higher in the full year 2020.
AT&T’s wireless subscriptions growth also benefited from a post-paid churn of 0.69%, compared to the 1.09% consensus. The company, whose debt is unacceptably high, is manageable. It decreased its net debt by $2.9 billion in the quarter. Its net debt to adjusted EBITDA stood at 2.66 times.
WarnerMedia’s revenue loss from the lack of movie releases in theatres is only temporary. HBO’s streaming service costs more per month than that offered by Netflix (NASDAQ:NFLX), Apple (NASDAQ:AAPL), or Disney (NYSE:DIS). Yet HBO has the best streaming service by quality and viewer rating. So long as the unit nurtures HBO, the cash flow from subscriptions will help pay down the debt.
Investors seeking value and income should take a look at AT&T. The downtrend in the stock appears over.
