When AT&T (NYSE:T) posted Q2/2021 results, markets barely reacted to its earnings beat and higher outlook. The telecom giant, whose dividend yield is in the 7% range, is a strong cash flow king. Income investors should take another look at it.
AT&T posted non-GAAP EPS of 89 cents. Revenue rose by 7.4% Y/Y to $44 billion. In mobility, it added 789,000 postpaid customers. Churn is very low at 0.69%.
HBO Max is another bright spot. Ahead of spinning out the unit with Discovery assets, it forecasted 70 million to 73 million subscribers.
For 2021, AT&T forecasted free cash flow of $27 billion. This is favorable to the WarnerMedia-Discovery spinoff, as it pays down debt from the sale. In addition, it may focus on the core business while continuing to reward income investors.
AT&T’s dividend cut may concern investors but is easy to understand. It will pay a dividend until next July 2022. Then, it will spin off the media unit and cut the dividend. Investors will get shares in the new company while holding the core business.
Your Takeaway
AT&T is a widely followed disappointment for long-term investors. The stock went nowhere in that time due to multi-billion-dollar acquisitions and writedowns. The stock may continue moving nowhere while investors collect a steady dividend. As the streaming business thrives, AT&T may raise its outlook again. This increases the perceived value of the WarnerMedia-Discovery spinoff shares.
