CNBC’s Jim Cramer added the current and former CEOs of AT&T Inc. (NYSE: T), John Stankey and Randall Stephenson, respectively, to his ‘Wall of Shame’ for putting the dividend-seeking investors of the company at risk.
Cramer has in the past added business executives to his ‘Wall of Shame’ who he thought have destroyed value for shareholders.
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In a press release earlier this week, AT&T announced that it will be merging it’s WarnerMedia business segment with Discovery (NASDAQ: DISCA) in a $43 billion deal. Post the deal, AT&T shareholders will own 71% of the combined entity while the rest will be owned by Discovery shareholders.
Major setback for dividend investors
On the day of the announcement, Cramer had said that he would want to own AT&T less after the discovery deal. Based on a targeted payout ratio of 40-43% and a post merger cash flow of $20 billion, it is likely that the company’s dividend will be cut by approximately half from $15 billion to $8 billion.
AT&T has remained a favored stock of dividend investors for a long time. Such a significant dividend cut would destroy shareholder value at a time when the AT&T stock has barely moved the trailing one-year period and is in fact down by 23% over the trailing five-year period.
More on shareholder value destruction
Cramer was highly critical of the acquisitions of DirecTV for $48.5 billion in 2015 and Time Warner for $85 billion in 2017 under the then CEO Randall Stephenson making AT&T the most indebted company in the U.S.
Read about the merger of AT&T’s WarnerMedia and Discovery here.
Just three years after the Time Warner deal, the company has decided to hive off its entertainment assets in order to reduce debt and raise capital to focus on its core telecom business.
But in the process, the dividends at AT&T will be cut as cash flows of the WarnerMedia business unit will also move from the company’s financial statements.
Cramer questioned whether the management had the interests of the shareholders in mind and added that he wants to even add the entire board of AT&T to his ‘Wall of Shame’.
