The latest quarterly earnings report did little to move AT&T (NYSE:T) shares. The sustained high cash flow is due to strong demand for mobile and broadband services. Its media division is a temporary distraction. For now, the cash burn from WarnerMedia will not hurt AT&T’s dividend.
AT&T’s WarnerMedia revenue fell 23% to $6.8 billion. The pandemic disrupted film production and closed theatres. But the blockbuster movies, like Tenet, are only delayed releases. Once the pandemic eases again or a drug company has a vaccine on market, revenue from the media division will rebound sharply.
The firm posted healthy cash flow and may pay the nearly 7% dividend yield. Management said it is willing to support a total dividend payout of 60%, up from 49% in the second quarter. Debt reduction continued and will help lower interest rate costs. The telecom giant refinanced debt at lower rates, taking advantage of the favorable environment.
AT&T emphasized that it did not cut capital expenditures to fund the dividend. And HBO Max viewership strength is a good start. Deals with amazon and Roku are inevitable and will widen HBO Max’s reach.
AT&T is unlikely to rally much. A steady stock price is welcome as investors continue to collect a reliable dividend.