Buy This Telecom Now For Long-Term Growth

| About: AT&T Inc. (T)

AT&T (NYSE:T) is a component of the Dow and is a provider of communications services. It operates wireless and wireline segments, and additionally operates advertising solutions and other operations segments. AT&T stock is currently priced at just under $35. It pays a worthwhile dividend, yielding 4.65%. The company is currently valued at slightly above analyst estimates for the next 12 months, and is not necessarily a screaming buy based on trailing valuations alone. AT&T has a market capitalization of slightly more than $200 billion.

With a forward P/E of just over 46, AT&T might seem to be trading at too high a ratio. Compared to its peers, however, AT&T is not out of line with its ratio. Verizon (NYSE:VZ) has a P/E ratio of just under 41, while Sprint (NYSE:S) is not profitable. When you combine this with the fact that the telecommunications sector has seen the third best growth in the S&P 500, it is clear that AT&T is more than a safe pick; it is going to continue to grow. It has run up over 20% in the past 12 months and should continue the momentum. Analyst targets range from a low of $30 to a high of $44 with a mean of $36.10, indicating that most anticipate more or less sideways movement in the stock. The stock has had significant momentum over the past year, and the long-term growth is forecast to track at 9.9%. The bottom line for me appears that the price is low and there is tremendous value in AT&T.

AT&T's stock has outperformed expectations for most of 2012. As with any company in the competitive technology sector, there are potential problems facing the telecom giant through 2012 and 2013, but nothing that will adversely affect its value going forward. AT&T still has the potential for healthy growth behind a promising outlook of increased revenue throughout the remainder of the year and far into 2013. I believe investors should buy now while the stock is undervalued. Current shareholders will do well to hold the stock for its attractive dividend and safe value.

AT&T has seen tremendous growth over the last quarter. AT&T's sales growth has increased by less than two percent from the previous year. AT&T's current ratio has decreased slightly since 2011 and is still currently less than one. Its debt-to-equity ratio has been relatively stable since 2011 and is currently around 0.5. AT&T's dividend yield is around 5% and this equates to an annual rate of $1.76.

AT&T has one of the highest dividend yields in the industry. Its growth rate is more than double the industry average for this year. This adds to the stock's attractiveness. Its return on equity for the past year is higher than the industry average. AT&T's stock has outperformed the industry and expectations thus far in 2012. Shareholders and interested investors can feel confident in holding this stock as a long-term asset in their portfolio.

There are some challenges facing AT&T. The failed acquisition of T-Mobile and $4 billion wasted in the process is now behind the leading telecom. Increasing competition from Verizon and Sprint, particularly in the area of iPhone and iPad subscriptions, is a growing concern but has not reached the point where it is truly impactful. Sprint's recent merger could increase competition further, but there are still hurdles that must be met before the merger goes through. Subscriptions for the iPhone are increasing for Verizon, but the RAZR line for Verizon powered by Google's (NASDAQ:GOOG) Android is almost just as popular for this telecom. AT&T continues to be the leading provider of iPhone users and will continue to be so into the future. AT&T will be helped by Apple's (NASDAQ:AAPL) recent introduction of the iPhone 5.

The availability of enough spectrum is a concern for AT&T to sustain its large volume of mobile subscribers. Mandates by the FCC are limiting AT&T options in purchasing additional spectrum. Nonetheless, AT&T still has access to the most spectrum of its competitors and should help alleviate Verizon's lead in providing 4G coverage.

Increasing competition from Verizon has been steadily gaining on AT&T's market share, but it will not be a serious concern going into the future. AT&T is a carrier for the extremely popular Samsung (OTC:SSNLF) Galaxy S III, and AT&T will also be looking forward to a boost in revenue from Apple's iPhone 5 that was recently released. The iPhone currently accounts for 70 percent of AT&T's smartphone sales. This is a good sign going forward for AT&T. The growth in U-Verse and iPhone subscriptions throughout the year should help earnings outpace the current demand in the market.

AT&T now has around 4 million TV subscribers on its U-verse service. It also has around 2 million on its high-speed internet platform for U-verse. This is rapid growth for a service that is less than a few years old. AT&T has experienced around 19 percent growth in its strategic business services revenues and 38 percent growth in U-verse revenues. This is the seventh consecutive quarter of wireline growth year-over-year. These services will continue strong growth deep into 2013 and beyond.

AT&T and Henkel AG & Company (OTCPK:HENOY) recently agreed on a new three-year contract to implement telepresence solutions and unified communications that help support Henkel's global presence in nine different locations worldwide. This technology will help enhance real-time communication and conference capabilities between management, employees and clients operating all over the world. This is just one example of the versatility AT&T has in its expansive portfolio of services outside of the mainstream consumer platforms. I believe shareholders can hold onto this stock and expect a long-term outlook of capital appreciation and substantial dividends as AT&T increases its mobile market share and global portfolio of available services and clientele.

AT&T is a strong buy for its continued growth and is an even better fit for investors wanting a safe stock that pays a good dividend.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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