AT&T Dividend: Cut, Spin-Off Cost Basis, and Tax Treatment

AT&T cut its dividend in April 2022 when it spun off WarnerMedia, dropping the quarterly payout from $0.52 to $0.2775 per share and the annual rate from $2.08 to $1.11, a reduction of roughly 47%.¹ That $0.2775 quarterly figure has not moved in the four years since. Shareholders who held through the spin-off also received shares of Warner Bros. Discovery (WBD), which pays no dividend at all, so the net cash income from the original AT&T position fell sharply and has stayed there.

Why the Cut Happened

AT&T distributed all outstanding shares of a subsidiary holding WarnerMedia to its shareholders, and that subsidiary immediately merged with Discovery, Inc. to form Warner Bros. Discovery. The transaction closed on April 8, 2022, with a record date of April 5.²

Losing WarnerMedia meant losing a large slice of AT&T’s revenue and cash flow. Management chose to resize the dividend rather than stretch to hold the old payout, leaving room to pay down the debt built up during the media acquisitions and to keep investing in 5G and fiber. The company that remained was a pure telecom, and the new dividend was set to fit that narrower business.

The Old Payout Versus the New

Before the spin-off, AT&T paid $0.52 per quarter, or $2.08 annually. That figure had been rising for more than three decades, which is what gave the stock its reputation as a bedrock income holding. The last $0.52 quarterly payment went out in February 2022.¹

Starting with the May 2022 payment, the quarterly dividend became $0.2775, or $1.11 annualized. AT&T has paid exactly $0.2775 every quarter since, through Q2 2026, with no increase.¹ Payments typically arrive in February, May, August, and November.

At a stock price around $28, the $1.11 annual rate produces a forward yield of roughly 4%, well below the 7%–8% AT&T carried before the spin-off but still above the S&P 500 average. For someone who bought AT&T purely for income, the arithmetic is blunt: 100 shares that once produced $208 a year now produce $111.

What Shareholders Received in the Spin-Off

Every AT&T shareholder on record as of April 5, 2022, received 0.241917 shares of WBD for each AT&T share held.² If you owned 100 shares, you kept those 100 shares and also received about 24 shares of WBD.³ The exchange ratio produced fractional shares for nearly everyone; brokerages pooled the fractions, sold them on the open market, and paid cash in lieu. That cash payment is a taxable event, treated as if you sold the fractional share immediately.

The detail that stings for income investors: WBD has never paid a dividend since it began trading. The shares you received generate no cash income. If you expected the spin-off shares to offset part of the dividend cut, they don’t. The only way to extract value from the WBD position is to sell.

Cost Basis Allocation for Tax Purposes

The spin-off was structured to qualify as a tax-free distribution under Section 355 of the Internal Revenue Code, so shareholders owed no tax simply for receiving the WBD shares.⁴ The tax hit arrives when you sell either the AT&T or the WBD shares, and to compute gain or loss on that future sale you have to split your original AT&T basis between the two stocks.

AT&T published the allocation formula on IRS Form 8937, which companies file when they take an action affecting the basis of their securities.⁵ The split is based on the relative market values of AT&T and WBD on April 11, 2022, the first trading day for both stocks after the distribution. Using the average of opening and closing prices that day ($19.26 for AT&T and $24.43 for WBD), AT&T derived:²

76.52% of your original AT&T basis stays with your AT&T shares.
23.48% of your original AT&T basis shifts to the WBD shares you received.

A Worked Example

Suppose you originally bought AT&T at $30 per share. Your new AT&T basis is $22.96 ($30 × 0.7652). The remaining $7.04 ($30 × 0.2348) becomes the total basis for the WBD shares tied to that one AT&T share. Since you received 0.241917 WBD shares per AT&T share, divide $7.04 by 0.241917 for a per-share WBD basis of about $29.10. If WBD is trading at $27 and you sell, you’d report a capital loss of about $2.10 per share. The same math applies to the fractional-share cash-in-lieu payment received back in 2022.

Verify Your Broker’s Numbers

Many investors still hold their WBD shares, and some brokerage records were never updated cleanly. If your broker shows a WBD basis of zero or shows your full pre-spin-off basis still sitting on your AT&T shares, your gain or loss on a future sale will be wrong. The responsibility to verify is yours. AT&T’s cost basis worksheet remains posted on its investor relations site.

Tax Treatment of the Current Dividend

AT&T’s quarterly dividends generally qualify as qualified dividends for federal tax purposes, taxed at long-term capital gains rates rather than ordinary income rates.⁶ For 2026, those rates are 0% for single filers with taxable income up to $49,450, 15% between $49,450 and $545,500, and 20% above that, with brackets roughly doubled for joint filers.⁷

Your broker reports the classification each January on Form 1099-DIV. Box 1a shows total ordinary dividends; Box 1b shows the qualified portion eligible for the lower rates.⁸ If your total ordinary dividends across all holdings exceed $1,500 in the year, you’ll also file Schedule B with your return.⁹

Will AT&T Raise the Dividend

Four years flat at $0.2775 is a break with AT&T’s history of annual increases. Management has been explicit about the priority order: debt reduction first, network investment second, cash back to shareholders third. AT&T generated roughly $19.4 billion in free cash flow in 2025, comfortably covering the roughly $8 billion annual dividend cost, so coverage is not the constraint. Leverage is.

In late 2025, AT&T announced a deal to acquire wireless spectrum licenses from EchoStar for approximately $23 billion in cash, expected to close around mid-2026.¹⁰ The company expects its net-debt-to-adjusted-EBITDA ratio to climb to roughly 3x after closing, then gradually return to its long-term target of 2.5x within about three years.¹¹ Until leverage reaches that 2.5x target, a meaningful dividend increase looks unlikely.

Management has pointed to a target of $45 billion or more in total shareholder returns from 2026 through 2028, which lumps together dividends, buybacks, and debt reduction. That figure does not specifically promise a dividend hike. Anyone buying AT&T today should plan around the $1.11 annual payout for at least the next couple of years.

1
AT&T Investor Relations. AT&T Inc Historical Common Dividends
2
AT&T Investor Relations. AT&T Inc / WBD Cost Basis Guide
3
AT&T Investor Relations. AT&T Shareholder Letter Regarding WarnerMedia Transaction
4
Office of the Law Revision Counsel. 26 USC 355 – Distribution of Stock and Securities of a Controlled Corporation
5
Internal Revenue Service. About Form 8937 – Report of Organizational Actions Affecting Basis of Securities
6
Internal Revenue Service. Topic No 404 – Dividends and Other Corporate Distributions
7
Tax Foundation. 2026 Tax Brackets and Federal Income Tax Rates
8
Internal Revenue Service. Form 1099-DIV – Dividends and Distributions
9
Internal Revenue Service. About Schedule B Form 1040 – Interest and Ordinary Dividends
10
AT&T. AT&T to Acquire Spectrum Licenses From EchoStar
11
AT&T. AT&T CFO Pascal Desroches to Update Shareholders