Last week, AT&T (NYSE:T) shares fell again and closed with yields at around 7.7%. Why are investors dumping the dividend-rich stock?
Markets are growing increasingly wary of the plans to merge Discovery and HBO Max assets. The stock spinoff is around a year away, so shareholders have to wait. Once done, AT&T shareholders will get a dividend cut while holding stock in the spun-off company. The media assets will not enjoy rich valuations like Roku (NASDAQ:ROKU) or Netflix (NASDAQ:NFLX). Instead, it is comparable to Fox (NASDAQ:FOX) or ViacomCBS (NASDAQ:VIAC).
The video and movie content from Discovery and HBO thrive on streaming subscribers. With the lockdowns a thing of the past, investors anticipate a slowdown in audience growth. They are selling AT&T stock and investing in less complicated dividend-income paying stocks instead. AT&T is not alone in the under-performance. Verizon (NYSE:VZ) also closed in on 52-week lows.
Investors could consider Canadian-based telecom giants like BCE (TSX:BCE) or Rogers (TSX:RCI) instead. The firms have a clear business plan and manageable debt. The media assets do not burn too much cash. Plus, the debt does not weigh on the balance sheet for either firm.
Bottom line
Markets are wary of investing in AT&T at this time. Wait for the stock to test 52-week lows before starting an initial position in the company.
