AT&T is a high-quality business. The company is steadily profitable, even during recessions. It also has a major growth catalyst in the form of its Time Warner acquisition. These qualities should allow the company to continue raising its dividend every year, as it has done for over three decades.
Debt remains a concern for investors, but the company’s immense free cash flow, in our view, diminishes the importance of this concern. Non-core asset sales will also aid in deleveraging.
Thanks to expected earnings growth, the high dividend yield, and a reasonable stock valuation, we believe AT&T can provide attractive total returns to shareholders in the coming years. As a result, AT&T stock remains a buy for income and value investors.