AT&T CEO John Stankey told CNBC on Friday that the company can keep paying dividends while investing in growing businesses like HBO Max direct-to-consumer service.
Stankey made in the comments on “Squawk on the Street” in response to a question from CNBC’s David Faber, who asked the CEO if the money AT&T used to pay for dividends would be better spent accelerating its digital transformation.
This is a binary option that AT&T should not do right now, Stankey replied.
“I feel very comfortable when we go down to 50, 50, 50 and 50 below the dividend payout ratios, so that we can keep that right now and not have to miss the opportunity to keep this business strong and sustainable.” said Stankey, appearing on CNBC as the host of AT&T, his Analyst and Investor Day.
“The moment I cross a path where I don’t think this return of capital can happen or be recognized, of course I have to ask that question,” Stankey added. “But we’re not in that position.”
AT&T paid $ 15 billion in dividends in 2020 and generated $ 27.5 billion in free cash flows, bringing the company’s total dividend payment ratio to 55%, according to the company’s earnings statement. January 27. For next year, the company predicts that free cash flow will be in the $ 26 billion range and its dividend payment ratio will be in the “high 50% range”.
AT&T traded around 6.8% on Friday, as its shares traded at more than $ 30 each.
Stankey said he is confident AT&T will be able to grow its revenue in the future. Revenue reached $ 171.8 billion in 2020, a year that increased the coronavirus pandemic, compared to $ 181.2 billion in 2019.
“We believe we have the growth portfolio,” Stankey said, adding that the company was deploying its “time and energy … in a way that we believe we can succeed in these markets and return this business to the fullest. line growth “.
HBO Max, which is part of AT&T’s WarnerMedia division, is a key focus for the company.
Stankey said he sees reasons to be optimistic and believes new subscribers will continue to turn to the broadcast service.
AT&T on Friday increased its subscriber forecast for HBO Max and HBO, projecting global subscribers of between 120 and 150 million for HBO Max and HBO by the end of 2025. At the end of fiscal year 2020, global subscribers they reached nearly $ 61 million for HBO Max and HBO and U.S. subscribers $ 41 million, helped by the Christmas Day release of “Wonder Woman 1984.”
“We’ve grown more in the last seven months of last year than in the previous decade,” Stankey said.
The company plans to release HBO Max in Latin America and later in Europe, he said. “Add the exciting development of incorporating an advertising option for customers [in June], which expands the national opportunity in the United States to start attacking prices that have not allowed us, “he said.” The team feels great for their momentum. We haven’t seen our best days. “
AT & T’s new forecast comes when Netflix recently surpassed 200 million subscribers during the fourth quarter of 2020 and Disney’s broadcast service Disney + surpassed 100 million subscribers just 16 months after its launch.
Stankey was also pleased with the recent performance of WarnerMedia’s Turner division, which includes TNT and CNN. The latter comes with a “record year, record scores, record revenue,” he said.
“We have very capable people who have done a good job positioning these assets even to be relevant in what I would call this cable package downsizing dynamic, not only downsizing from a subscriber base, but also in terms of of relevant number of channels so that a customer can move forward, ”he said.
– CNBC’s Sarah Whitten contributed to this report.