What happened Shares of AT&T (NYSE: T) fell 5.8% on Tuesday as shareholders reacted to the likelihood of substantially reduced cash payouts from the media titan following the pending spinoff of its WarnerMedia business. So what AT&T announced on Monday that it intends to merge its WarnerMedia assets with Discovery to create a new streaming-focused company. In return, AT&T stands to receive $43 billion, which it will use to reduce its sizable debt load. Analysts and investors applauded that part of the plan. What they didn't like, however, was the prospect of AT&T cutting its dividend nearly in half following the spinoff. AT&T's stock price sank on Tuesday. Image source: Getty Images. AT&T said it would "resize" its dividend to account for the distribution of WarnerMedia to shareholders. Management anticipates that the company will pay out between 40% and 43% of its forecast annual free cash flow of $20 billion. That would place its post-spinoff dividend at roughly $8 billion per year, compared to the $15 billion it distributed in 2020. Now what Skeptics have long questioned whether AT&T could continue to support such a high dividend, particularly after its debt load exploded to more than $180 billion following its acquisition of Time Warner in 2018. These concerns were reflected in AT&T's dividend yield of over 7%, which is well above rival telecom titan Verizon's 4.4% yield. When a company sports a significantly higher dividend yield than its industry peers, that can indicate that investors are worried that it may eventually need to cut its payout, and pricing the stock accordingly. In this case, it appears the skeptics were correct. 10 stocks we like better than AT&TWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and AT&T wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of May 11, 2021 Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Discovery (C shares) and Verizon Communications. The Motley Fool has a disclosure policy.Source