Why AT&T Stock Is Down By 5% Today

AT&T Stock Falls As Company Announces WarnerMedia Spin-Off And Cuts Dividend

Shares of AT&T gained downside momentum after the company announced that it would spin off its interest in WarnerMedia to shareholders at closing of the merger with Discovery.

AT&T shareholders will receive an estimated 0.24 shares of Warner Bros. Discovery (WBD) common stock for each share of AT&T they own. As a result, AT&T shareholders will own approximately 71% of the new WBD. After the transaction is closed, WBD is expected to be listed on the NASDAQ Global Select Market under the ticker “WBD”.

AT&T John Stankey commented: “In evaluating the form of distribution, we were guided by one objective – executing the transaction in the most seamless manner possible to support long-term value generation”.

After the transaction is completed, AT&T expects to pay an annual dividend of $1.11 per share, down from the previous dividend of $2.08 per share.

What’s Next For AT&T Stock?

AT&T stock is one of the popular dividend plays, so it’s not surprising to see that the market reacted negatively to the dividend cut. After the dividend cut, the stock will yield about 4.5%.

This is a rather attractive yield compared to the current yield of S&P 500, which is below 1.50%. However, AT&T stock underperformed S&P 500 for years, and it remains to be seen whether the current yield will attract new investors at a time when Treasury yields are moving higher and the market expects rate hikes from the Fed.

In this light, it remains to be seen whether speculative traders and investors will rush to buy AT&T stock after the recent pullback. The stock is trading at levels seen back in the 2000s, and it looks that many market players have lost confidence in the stock’s ability to show sustainable upside momentum.

For the market, the main event of the day is the dividend cut rather than the ongoing transformation, so AT&T will have to come up with positive catalysts for its stock to have a chance to move higher.

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