AT&T Makes Pitch To Mom and Pop With Preferred Shares -- WSJ
December 31 2019 - 3:02AM
Dow Jones News
By Drew FitzGerald
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 31, 2019).
AT&T Inc., which piled on billions in debt to become a media
giant, is getting more creative with its pitch to investors.
The company earlier this month issued a new class of shares that
guarantee its holders a dividend worth 5% of the share price but no
voting rights. The new securities show AT&T, long known as a
haven stock for investors in search of safety, aggressively
catering to its base.
"People are looking for yield," AT&T finance chief John
Stephens said at a December Wells Fargo investor conference. "If
you can guarantee [it]...there's demand for it."
Financing is key to AT&T's future as it digests the $80
billion-plus Time Warner Inc. acquisition. That deal made AT&T
the world's most indebted nonfinancial company with a net $180
billion owed.
The company has since whittled tens of billions of dollars off
that total and refinanced much of the remainder to take advantage
of low interest rates. But the company must also pay its
stockholders $15 billion of dividends each year and spend billions
more buying back shares over the course of a three-year plan
announced earlier this year.
AT&T unveiled the plan after it struck a truce with activist
investment fund Elliott Management, which pushed the company to
boost its stock price by buying back many outstanding shares. New
preferred shares will give the company more cash to help retire
common stock and pay down old debt.
The company had no immediate comment on the new equity.
AT&T has continued to raise the dividend payment it makes on
common stock, recently upping the annual cash payment by 4 cents to
$2.08 a piece. Those shares already give investors an unusually
high 5.3% dividend yield, though the ratio could fall if AT&T's
stock appreciates, making preferred shares more attractive.
Preferred shares are one of the many tools the communications
and entertainment company has used to finance its operations. The
company in recent years has also issued bonds denominated in euros
and Australian dollars.
AT&T has racked up "a lot of frequent flier miles" over the
past two years as its finance executives seek new buyers for its
debt and equity, according to Neil Begley, an analyst for
credit-rating firm Moody's Investors Service.
He said the strategy helps the company access capital from
sources other than big U.S. institutional investment funds.
"They're just trying to take advantage of what's in front of
them," Mr. Begley said. "Diversifying sources of capital is
particularly important for this company."
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
December 31, 2019 02:47 ET (07:47 GMT)
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