Warner Bros. Discovery

Capital allocation has been mixed. The big strategic move was merging Discovery and WarnerMedia. WBD quickly cut costs and is paying down debt. It spent virtually all free cash first on servicing debt; no dividends have been reinstated and share buybacks have been paused.

Previously, Discovery had bought back stock aggressively ( $8B of Discovery shares by 2021)), but that was pre-merger and financed at high valuations. Post-merger, focus has been on operational efficiency. Management has largely funded streaming and creative spending internally rather than dilutive stock deals.

WBD is not diluting the share count now, but executive stock compensation (~$557M in 2024) is not insignificant relative to earnings. Overall, capital has been steered into debt repayment and restructuring – sensible in context, but returns on invested capital have been low during the transition.

We would score higher if WBD were generating excess cash for shareholders; currently, it is rebuilding stability.