AT&T has been a solid dividend stock in the portfolios of many U.S. investors, but there’s more to its story than just steady payouts. Over the past year, AT&T’s stock price has surged by approximately 36%, surprising some skeptics. As the company prepares to release its earnings report on January 27, many are wondering whether it’s the right time to invest further in this telecom giant.
Dividend Stability Brings Renewed Confidence
AT&T’s dividend yield remains a key attraction, sitting at a robust 5%—well above the S&P 500’s average of 1.3%. Despite past concerns over the sustainability of its payouts, the company has managed to alleviate fears with solid free cash flow figures.
In its last earnings report for the quarter ending September 30, 2024, AT&T’s adjusted operating income held steady year over year, and revenue declined by less than 1%. The company also projects free cash flow of $17–$18 billion for the full year 2024. With quarterly dividend payouts totaling roughly $2 billion, AT&T appears to have ample room to maintain and potentially even increase its dividends.
For investors, this is a promising shift. After spinning off WarnerMedia in 2022, AT&T faced lingering doubts about its financial stability. Those doubts have now largely been put to rest, boosting investor sentiment.
Comparing AT&T to Competitors: Value in Focus
While AT&T’s stock has gained momentum, its valuation may seem elevated compared to historical averages. Currently trading at over 18 times trailing earnings, it’s pricier than in the past. How does that stack up against its main competitors? Here’s a snapshot:
| Company | P/E Ratio | Dividend Yield |
|---|---|---|
| AT&T | 18+ | 5.0% |
| Verizon Communications | 7.4 | 7.4% |
| T-Mobile US | 20.2 | No dividend |
AT&T offers an appealing dividend yield compared to T-Mobile, which doesn’t pay dividends at all. However, Verizon boasts a higher yield at a much lower price-to-earnings ratio. The choice for investors often comes down to their preference for growth versus income.
What to Expect From the Upcoming Earnings Report
AT&T’s earnings report on January 27 will be closely watched. Key areas of interest include:
- Revenue Stability: Will revenue remain flat or show growth? Analysts are keeping a close eye on whether AT&T can buck its recent stagnation.
- Free Cash Flow Performance: Hitting or exceeding the $17–$18 billion target could reinforce confidence in the company’s financial health.
- Dividend Strategy: Although there’s no guarantee, many investors are hopeful for a dividend hike in the near future, given the company’s strong free cash flow cushion.
In addition, broader market conditions and consumer behavior in the telecom sector will play a role in shaping the stock’s trajectory.
Is AT&T Still a Buy?
For income-focused investors, AT&T remains an attractive choice. Its high dividend yield, combined with improving financial stability, makes it a strong candidate for long-term portfolios. However, for those prioritizing growth, the stock’s performance may not be as compelling, especially given its valuation relative to peers.
Before making any decisions, it’s crucial to assess your investment goals. If reliable dividends and steady cash flow are your priority, AT&T is hard to beat in the telecom sector. But for those seeking faster growth or undervalued opportunities, it might be worth exploring other options like Verizon.
As January 27 approaches, all eyes will be on AT&T to see if it can continue its path of stability and deliver for its shareholders. Whether you’re holding or considering buying, the company’s next moves could signal what’s ahead for the telecom giant in 2025.
