Now Is A Good Time To Add This Undervalued High-Yield Dividend Aristocrat To Your Portfolio

Summary

• AT&T has struggled for years with secular declines in some of its core businesses.
• This has led to it drastically underperforming the broader market.
• However, while AT&T has made plenty of mistakes from a capital allocation perspective, it does face several potentially strong growth catalysts that could accelerate growth.
• Today's valuations are pricing in almost none of the growth factors that could lead AT&T to vastly outperform expectations, accelerate dividend growth in the future, and achieve market beating total returns.
• That being said there are plenty of risks that investors need to understand before buying AT&T.

(Source: imgflip)

The goal of my retirement portfolio is to build a diversified collection of quality, undervalued dividend growth stocks that can generate market-beating long-term total returns.

This means I'm always on the hunt for unloved dividend blue chips whose shares are pricing in cash flow growth below what I believe to be reasonable. AT&T (NYSE:T) is one such company thanks to years of struggling with negative secular trends, including increased competition in wireless and cord cutting.

T Total Return Price data by YCharts

In fact, the shares have badly underperformed the S&P 500 during this bull market as Wall Street has given up believing that Ma Bell can achieve anything like the growth rates of the past.

However, there are two reasons why I think AT&T is potentially poised for far more impressive cash flow growth. Catalysts that could result in far better dividend growth and total returns than what its current share price implies.

And while AT&T continues to face certain key risks going forward, I consider today's valuation attractive enough to make it worth recommending for most diversified dividend growth portfolios.

This Is Why Wall Street Hates AT&T

Metric	2017 Result
Revenue Growth	-2.0%
Adjusted Net Income Growth	7.3%
Free Cash Flow Growth	3.9%
Adjusted EPS Growth	7.4%
FCF/Share Growth	4.0%
Dividend Growth	2.1%
FCF Dividend Payout Ratio	68.4%

Click to enlarge

(Source: earnings presentation)

AT&T posted a pretty lackluster year in 2017. While adjusted earnings and free cash flow per share both grew (thanks to cost cutting), revenue shrank. That was due to two main factors.

First the wired businesses (landline phone, internet, and cable), which account for about 50% of sales, continued to face secular declines. That's both in landline phones, but also video subscribers.

(Source: AT&T earnings presentation)

Thanks to its 2015 $49 billion purchase of DirecTV, AT&T is the nation's largest pay TV provider. However, its U-verse cable TV business has been steadily eroding over time and DirecTV's satellite TV business is also facing pressure from cord cutting which appears to be accelerating.

For example, in 2016 and 2017 the pay TV industry lost 0.8% and 1.6% of its customers, respectively. AT&T lost a total of 1.2 million DirecTV and U-Verse cable subscribers. AT&T appears to have given up on U-Verse, which has lost 2 million subscribers or 36% of its customer base in the last two years.

Rather AT&T's pay TV strategy is focused on two things. First it's trying to bundle DirecTV with wireless plans. As AT&T's CEO Randall Stephenson explains: "Bundling allows us to have profitability from that combined account...It also creates higher value, lifetime value, for each of those customers."

In addition, the company has launched DirecTV Now, a streaming service that in 13 months has managed to grow to 1.2 million subscribers. Management estimates that about 50% of these customers are new subscribers to pay TV, meaning that it's not necessarily cannibalizing DirecTV customers to the extent some feared.

However, the issue with DirecTV now is that it simply generates less revenue than cable or satellite TV subscriptions. In addition, the content costs are rather large, about $30 per month for DirecTV Now's "live a little" package.

According to analyst Michael Nathanson, when you factor in all costs including content, subscriber acquisition costs, cost to deliver the content, and customer service expenses, AT&T might be losing about $0.26 per month on DirecTV Now. AT&T claims that the economics of its streaming service will improve in the coming years, thanks to additional premium bundling, greater economies of scale, and lower content costs due to the acquisition of Time Warner (TWX).

However, ultimately the problem is that DirecTV Now is targeted at far more price sensitive consumers, who may not be looking for more premium offerings.

AT&T Entertainment Segment Results

(Source: AT&T earnings presentation)

In the meantime, the lower revenues and declining customer base mean that the entertainment segment continues to face margin compression that is weighing on profit and free cash flow growth.

(Source: AT&T Annual Report)

Now the bright spot for AT&T is its wireless business, which is the second largest in the US thanks to an extensive network that covers 400 million people in America and Mexico.

AT&T continues to add new subscribers at an impressive clip, on both sides of the border. However, here too there are issues. For one thing, in recent years, T-Mobile (TMUS) and Sprint (S), who combined have about 30% of the US wireless market, have initiated fierce price competition, especially in unlimited data plans.

AT&T has responded with two plans of its own, both above and below the cost of T-Mobile's offerings. And it's also bundled them with HBO, which has helped to keep the user base growing. That was to offset T-Mobile's bundling of its plans with Netflix (NFLX).

(Source: AT&T earnings presentation)

However, the price war in mobile has resulted in declining average revenue per user, which was down 1.9% YOY when including AT&T's NEXT customers (the accelerated phone replacement program). For non-NEXT customers, ARPU declined 2.6% YOY.

AT&T Wireless Results

(Source: AT&T earnings presentation)

The result has been a decline in margins that has the market worried that, while AT&T continues to gain customers, its bottom line may not be able to grow significantly.

Finally, there is the international business consisting of AT&T's Mexican wireless business and its Latin American pay TV operations.

AT&T International Results

(Source: AT&T earnings presentation)

AT&T has invested heavily into its Mexican wireless business after spending about $4.5 billion in 2015 to acquire two Mexican telecom providers. The result is that AT&T is the fastest growing wireless carrier in that country, adding 3 million subscribers (25% growth) in 2017.

But the issue AT&T faces is that it's competing with Mexican juggernaut America Movil (AMX), which has 70% market share compared to AT&T's 10%. In addition, the cost of expanding its network coverage in Mexico is enormous, with AT&T planning on spending $3 billion in 2018 capex to grow that business. One that is still generating net losses for the company.

But there is some good news, both short and long term. In the short term, tax reform means that AT&T expects its tax rate to fall from 38% to 25%, resulting in substantial earnings and free cash flow growth.

Metric	2018 Guidance
Adjusted EPS	14.8% Growth
FCF	19.3% Growth
FCF Payout Ratio	58.8%

Click to enlarge

(Source: earnings release)

In fact, AT&T expects to generate $21 billion in free cash flow in 2018, despite a plan to increase capex significantly (to $25 billion). Which would mean that after paying around $12 billion in dividends it would have $9 billion left over to pay down its debt.

But, of course ,tax reform is a one-time deal. While the new tax rate may be permanent, the earnings and cash flow boost won't repeat beyond this year. But there are some positive long-term catalysts that should help AT&T to grow in the future.

2 Organic Growth Catalysts Mean Profit Growth Might Accelerate

There are two organic growth catalysts that keep me invested in AT&T. First, while the current wireless market is seeing declining economics, there are reasons to expect this to change within a few years.

Analysts like Morningstar's Allen Nichols expect that wireless pricing will stabilize starting in 2019. This is because T-Mobile and Sprint can only cut prices so much. That's especially true given that they will need to continue upgrading their networks, especially as the industry transitions to the new 5G standard.

Second, AT&T has a good track record creating large economies of scale courtesy of its enormous wireless customer base. For example, it's able to service about 900 wireless customers per employee compared to just 600 for T-Mobile.

In addition, AT&T has been investing heavily into automation, and virtualization of its network. This means that AT&T is using more extensive use of software to boost its efficiency. In 2016, 34% of network was virtualized, which increased to 55% and the company is on track to hit 75% in 2020.

A good example of AT&T's approach is its increasing use of white-box routers and data switches that run on open source software. Basically, this means that rather than pay Cisco (CSCO) for its premium branded router, hardware, and software products, AT&T is using unbranded generic alternatives that still meet its needs, but are much cheaper. How much cheaper? Well, in 2013 AT&T paid Cisco $2 billion for its networking solutions products and services. In 2017, that was down to just $400 million and may end up going to zero within a few years.

Such cost savings and economies of scale are why AT&T's wireless EBITDA margins were able to rise from about 35% in 2014 to 44% today. And with the US wireless price war expected to cool down and reverse starting in 2019, analysts expect AT&T's ARPU and EBITDA margins to start climbing next year and through the end of 2022.

Why would prices start to rise? Well, that brings me to the big organic growth catalyst for owning AT&T: the rise of 5G telecom networks. 5G is the next generation of wireless and offers three distinct benefits:

• greater speed (up to 20 GB per second) and data capacity
• up to 200 times lower latency (time to send data packet to receiving device)
• the ability to connect a lot more devices at once (such as sensors and smart devices)

5G is a potential game-changer in many ways. For one thing it will be the backbone of the so-called "internet of things." That includes the 31 billion devices that are expected to be connected to the internet by 2020. That's not just things like smartphones and cars, but also industrial equipment and infrastructure, all of which will see much-improved reliability and efficiency gains from constant data monitoring and analysis.

Qualcomm (QCOM) says its first 5G enabled chips are coming in 2019, and AT&T is already testing 5G in two cities. It has plans to roll it out to 12 by the end of 2018 and 24 cities in total by the end of 2019. The company has been investing heavily into the higher frequency spectrum for 5G which has the biggest speed and data capacity advantages over current 4G technology.

But here's the biggest reason to be excited about 5G. It's not just a far superior and faster way to watch YouTube or stream Netflix on your phone. Rather it also creates the opportunity for major wireless giants like AT&T and Verizon (VZ) to win huge market share in the internet service provider or ISP market.

For example, Verizon is planning on testing 5G home internet service in five cities by mid-2018. The average home internet subscriber uses 190 GB of data per month. Wireless providers simply don't have the network capacity over 4G LTE to provide home and business internet wirelessly.

But 5G could change the game forever. Rather than run massively expensive fiber cables that require digging up streets, AT&T could run far less fiber to 5G cell sites every few blocks. In fact, AT&T has already started testing a way to become a nationwide ISP providing wireless multi-gigabit speed internet to potentially hundreds of millions of customers coast to coast.

According to Andre Fuetsch, president of AT&T Labs and chief technology officer, AirGig (which uses 5G transmitters attached to power lines) could "bring this multi-gigabit, low-cost internet connectivity anywhere there are power lines – big urban market, small rural town, globally.”

In other words, 5G will allow today's wireless providers to provide a much-improved alternative to the standard internet oligopolies that most people face today. How big a market are we talking about here?

• Over 93 million US internet subscribers in 2017
• $118 billion in projected revenue for 2018

And keep in mind that AT&T's investments in Mexican wireless could similarly offer it a cost effect way to leverage that wireless tech to provide 5G home internet in a country with 82 million internet users, a figure that is growing quickly.

Mexican Internet Penetration

(Source: Statista)

Then of course there're the subscriptions that AT&T could sell for driverless cars, and anything connected to the IOT. These could be bundled service packages sold to individuals and businesses. But again bundling of numerous devices with home internet use and smartphones is a great way to steal market share from traditional cable companies that dominate America's ISP market today.

But 5G is still several years away, and will take a long time to scale up to achieve significant top- or bottom-line growth for AT&T. Fortunately, the company has a medium-term growth catalyst to help bridge the gap.

Time Warner Acquisition A Big Win In Several Ways

Time Warner is one of the world's premier content creators and a wide moat business that owns:

• HBO & Cinemax: 134 million global subscribers in over 150 countries

• Turner Networks which owns numerous cable channels including: Adult Swim, Bleacher Report, Boomerang, Cartoon Network, CNN, ELEAGUE, FilmStruck, Great Big Story, HLN, iStreamPlanet, Super Deluxe, TBS, Turner Classic Movies (TCM), TNT, truTV and Turner Sports

• Warner Brothers Entertainment: produces over 70 TV shows a year, and has a film library consisting of over 8,000 titles

In a world where content, not distribution, is now king, Time Warner stands as one of the titans of its industry. One that spends a total of about $9 billion a year on new content creation.

Time Warner 2017 Results

Metric	2017 Results
Revenue Growth	6.7%
Adjusted Net Income Growth	23.9%
FCF Growth	1.8%
Adjusted EPS Growth	24%
FCF/Share Growth	1.9%

Click to enlarge

(Source: earnings release)

Time Warner is also growing much faster than AT&T, with strong top and bottom line growth in 2017. Note that FCF was flat due to higher capex spending. However, Time Warner's free cash flow margin was still 14% in 2017, far superior to AT&T's 10%.

AT&T wants Time Warner for three main reasons. First it would be able to substantially lower its content costs for DirecTV Now, which is the only growth avenue its entertainment segment has. That could help stabilize the margins for that business.

However, the biggest reason for paying $85 billion for Time Warner is that it provides a much-needed short-term and long-term growth boost.

Company	Revenue	Adjusted Earnings	FCF	Shares	Adjusted EPS	FCF/Share
AT&T	$160.6 billion	$18.9 billion	$17.6 billion	6.2 billion	$3.05	$2.85
Time Warner	$31.3 billion	$5.8 billion	$4.5 billion	791 million	$7.27	$5.62
Post Merger	$191.9 billion	$24.7 billion	$22.1 billion	7.3 billion	$3.37	$3.02

Click to enlarge

(Sources: earnings releases, merger announcement, Morningstar)

AT&T is paying for Time Warner 50% in stock, and 50% with cash (and $40 billion in new debt). And despite the 18% share dilution that AT&T is facing the deal will still be immediate accretive both to adjusted EPS and FCF/share.

In fact, in 2017, the deal would have meant 11% greater adjusted EPS and 6% FCF/share. If the deal closes, then AT&T's 2019 Adjusted EPS and FCF growth should come in at 8% and 2.4%, respectively. That's assuming no organic growth from its existing assets.

In other words, while tax reform was the main earnings and cash flow driver in 2018, the Time Warner acquisition would provide a nice boost to the bottom line in 2019. However, it's the long-term growth benefits that should have AT&T investors really excited.

Company	Current FCF	10 Year Analyst FCF Growth Forecast	Analyst Projected 2027 FCF
AT&T	$21 billion (2018 guidance)	6.0%	$35.5 billion
Time Warner	$4.5 billion	13.3%	$15.7 billion
Post Merger	$25.5 billion	8.1%	$51.2 billion

Click to enlarge

(Sources: management guidance, Morningstar, F.A.S.T.Graphs)

Now all long-term analyst growth projections need to be taken with a large grain of salt. After all predicting how a number of industries, including ones going through massive disruption and change, will grow is very hard.

However, that said, they can still serve as a useful tool for modeling potential investment outcomes, (just don't make them the only reason you invest). In this case, we can see that the analyst consensus is for AT&T to return to much stronger growth in the coming years, thanks to several factors. These include a much lower tax rate, rising long-term wireless margins, and the long-term effects of 5G.

But Time Warner is expected to grow its free cash flow at more than twice the rate. This means that if the Time Warner merger is approved, then AT&T could potentially be facing a 33% boost to its long-term cash flow growth. And while these are likely highly bullish projections, if they come anywhere close to being accurate then within a decade AT&T is going to be generating a river of FCF. That means plenty of resources to pay down its massive debt, and also accelerate its dividend growth.

Dividend Profile: With Or Without Time Warner Merger AT&T Looks Like A Potentially Attractive Low Risk Stock

Company	Yield	2018 Projected FCF Payout Ratio	10 Year Projected Dividend Growth	10 Year Total Return	Risk-Adjusted Total Return
AT&T (without merger)	5.70%	58.8%	2% to 5%	7.7% to 10.7%	19.7% to 27.4%
AT&T with merger	5.70%	58.6%	2% to 7%	7.7% to 12.7%	19.7% to 32.6%
S&P 500	1.9%	32.0%	6.2%	8.1%	8.1%

Click to enlarge

(Sources: earnings releases, Morningstar, management guidance, F.A.S.T.Graphs, CSImarketing, Multpl)

The most important part of dividend investing is the payout profile which consists of three parts: yield, dividend safety, and long-term growth potential.

AT&T is famous for being a high yielding, sleep well at night or SWAN stock, thanks to its 34 straight years of dividend growth. That makes it a dividend aristocrat and one that also yields nearly three times the S&P 500's paltry payout. Regardless of whether the Time Warner merger is approved, the dividend will be very well covered by its highly defensive (recession resistant) free cash flow.

However, there is more to a safe dividend than just a good payout ratio. You also need to consider the balance sheet and here is where AT&T falls a bit flat.

Company	Debt/EBITDA	Interest Coverage	S&P Credit Rating	Average Interest Rate
AT&T	3.6	7.3	BBB+	3.8%
Industry Average	2.2	8.2	NA	NA

Click to enlarge

(Sources: Morningstar, F.A.S.T.Graphs, Gurufocus)

Thanks to years of major acquisitions and heavy borrowing to fund its capex, AT&T's leverage ratio is much higher than the industry average. The good news is that the company can still easily service its debt with its river of cash flow and so retains a strong investment grade credit rating that allows it to borrow cheaply.

However, should the Time Warner merger close then AT&T will be taking its debt to a whole new level.

Company	Total Debt	EBITDA	Debt/EBITDA	Annual Interest Cost	Interest Coverage Ratio
AT&T	$164.4 billion	$45.8 billion	3.6	$6.3 billion	7.3
Time Warner	$23.7 billion	$7.9 billion	3.0	$1.2 billion	6.6
Post Merger	$228.1 billion	$53.7 billion	4.2	$9.0 billion	6.0

Click to enlarge

(Source: Morningstar, merger press release)

Note that on a net debt/EBITDA basis AT&T's pre and most merger leverage ratios would come in at 2.2 and 2.9, respectively. However, previous management had been targeting a long-term net debt/EBITDA ratio of 1.5 which it has "temporarily" abandoned.

In addition, AT&T has been warned by Moody's that if the deal closes it could get a downgrade due to its much larger debt burden. So buying Time Warner is a double-edged sword. On one hand, it provides a big boost to the company's free cash flow which is what funds both dividends and debt repayments.

However, even though AT&T's short and long-term FCF is likely to become much larger, most of that marginal FCF will have to go to quickly paying down the largest debt burden in corporate America.

This is what creates so much uncertainty about the dividend growth potential. On one hand, management has been handing out its token dividend increases with clock work like consistency since the financial crisis. Given AT&T's dividend aristocrat status these are likely to continue.

However, whether or not dividend lovers see any benefit from the much larger FCF stream will come down to how quickly management pays down that debt. It also depends on whether management can avoid the temptation to make other large purchases.

If AT&T does end up continuing its token increases then the stock is likely to continue underperforming the market. But even in that case, the fact that AT&T is 64% less volatile than the S&P 500 (5-year beta of .39), might still make it an attractive high-yield income investment.

That's because on a risk-adjusted total return basis (total return/5 year beta), it would likely beat the market. And if the company can actually convert its faster FCF growth into accelerated dividend increases? Then AT&T at today's price might be able to beat the market on an absolute basis as well.

Valuation: A Good Company At A Good Price

T Total Return Price data by YCharts

It has been a rough year for AT&T shareholders, thanks to a combination of regulatory uncertainty over the Time Warner merger, rising interest rates, and disappointing earnings results. However, this means that today AT&T is potentially an attractive low risk, high-yield investment.

Forward P/FCF	Historical P/FCF Ratio	Implied Earnings Growth Rate	Yield	Historical Yield	Percentage Of Time In Last 22 Years Yield Has Been Higher
10.4	17.2	1.0%	5.70%	5.30%	18%

Click to enlarge

(Sources: management guidance, F.A.S.T.Graphs, Gurufocus, YieldChart)

That's because its forward price to free cash flow is just 10.4, much lower than its historical norm. Now it should be noted that 17.2 is the average P/FCF since 1998, and includes time periods when AT&T's growth prospects were far greater.

However, at today's near single-digit free cash flow multiple AT&T is pricing in about 1% FCF/share growth. I consider that a pretty low bar to clear, given the strong potential growth catalysts it has coming down the pike.

The other way I like to value dividend stocks is by comparing the yield to its historical norms. In this case, the 5.7% yield is highly attractive compared to the 13 year median. And over the last 22 years, AT&T's yield has only been higher 18% of the time.

Ultimately, I'm most concerned about not overpaying because the core of my investment strategy is "the right company at the right price." For a industry leading blue chip, and a dividend aristocrat with potentially much stronger growth potential ahead, I'm happy to pay fair value.

(Source: Simply Safe Dividends)

As a good proxy for that, I like to compare the current yield compared to a company's five-year average yield. Using that method, I estimate AT&T is about 8% undervalued and so potentially a good buy right now.

Note that 8% is far from a "screaming buy." But if you are looking for a low volatility blue chip and a solid source of recession proof income, then AT&T is a good choice at current levels.

Risks To Keep In Mind

While I consider AT&T a highly defensive (recession resistant), low risk stock, nonetheless several things could go wrong for Ma Bell.

First, we can't forget that as a large telecom there is plenty of political/regulatory risk. For one thing the Time Warner merger is being blocked by the Department of Justice and the case is currently in court. Analysts such as Morningstar's Neil Macker expects that a final decision might not happen until sometime in the second half of the year with the merger potentially closing during the fall. That's because even if a ruling comes relatively soon, the losing side is likely to appeal it.

The DOJ is claiming AT&T could, “use its control of Time Warner’s popular programming as a weapon to harm competition.” In theory, AT&T might raise the prices it charges other cable networks for Time Warner channels or make its content exclusive to AT&T's customers.

In reality, there is very little chance of that since the major reason AT&T wants Time Warner is to gain access to a higher margin and faster growing business. That means it needs to be platform neutral in order to keep Time Warner's revenues and cash flow growing and falling to its own bottom line.

Ultimately, I expect the court to rule in AT&T's favor since the precedent for vertical mergers is quite favorable. It's only horizontal mergers such as Disney's (DIS) acquisition of Fox (FOXA) that poses the biggest anti-trust issues. However, the point is that in court anything can happen and the deal might not go through. In fact, Morningstar puts the odds of the deal being blocked at 50%.

And the Time Warner merger case is hardly the only regulatory challenge AT&T faces. For example, on January 26^th the FCC forced FiberTower (which AT&T recently purchased for $207 million to obtain its 5G spectrum) to return all of its 24 GHz and some of its 39 GHz spectrum license. AT&T will still end up with some valuable spectrum but not nearly as much as it had hoped.

And speaking of 5G, we can't forget that while its potential for boosting AT&T's growth is immense, with great opportunity comes great cost and uncertainty as well. After all, it will still likely take many years and massive amounts of money to build out a nationwide 5G network to take full advantage of this opportunity.

How much money? Well, in the last five years AT&T spent $135 billion to upgrade and improve its 4G LTE network in the US. That includes spending an unprecedented $18 billion in 2015 for AWS-3 spectrum licences. On a price/MHz basis, that's the most any telecom has ever spent on licenses.

Which brings us to the biggest potential stumbling block for AT&T which is its massive debt, which will only grow larger if the Time Warner deal closes. While AT&T will likely be generating over $12 billion annually in excess (post dividend) FCF by 2020, that will all have to go to paying down the $228 billion debt load.

Ultimately, the concern for AT&T shareholders is that this much leverage means that the company might not have enough flexibility to compete in the growth markets it is targeting, such as 5G, and international expansions. Which brings us to the biggest unknown of all.

5G is certainly the future of telecom and likely the future of the internet itself. The potential for growth is enormous but that means that AT&T will have to compete with numerous rivals for what is still uncertain market share and unknown margins.

It could very well be that even if AT&T can obtain 25%, 30%, or even 35% of the American ISP market, margin pressure from T-Mobile and Sprint might end up causing the profitability of that revenue to disappoint investors. And don't forget that ultimately all of its growth efforts are still being dragged down by its declining wired businesses including landline phones, cable and satellite TV.

These are likely to continue falling and thus far AT&T's capital allocation strategies have been rather disappointing. After all, it overpaid for DirecTV to buy a cash-rich source of growth, but that resulted in a lot of new debt and that business is now likely in permanent decline.

Capital allocation risk is the final thing to consider. Because even if the Time Warner deal closes, and that business continues to execute well, there is no guarantee that once AT&T deleverages significantly it might not run out and buy something else that's big and foolish.

Or to put another way, AT&T's dividend growth potential, which is the cornerstone of its ability to generate long-term market-beating total returns at current valuations, might go unfilled.

Bottom Line: Market Is Possibly Underestimating AT&T's Long-Term Growth Potential, Making Now A Good Time To Buy

Don't get me wrong, I'm not claiming that AT&T is ever going to become one of the hottest stocks on Wall Street. That's simply not possible given the company's business model, which is focused on defensive and recurring cash flow, and includes several legacy industries that are in secular decline. In addition, whether or not the Time Warner merger is approved, AT&T's high debt load is going to force it to grow its dividend much slower than FCF for several years as it de-leverages its balance sheet.

That being said, I do think that 5G and the Time Warner acquisition provide AT&T with some major potential growth catalysts that could cause it to beat the low growth expectations baked into its price. And given the attractive and highly secure yield now on offer, AT&T investors are being paid handsomely to wait for the company's long-term thesis to play out.

Analyst’s Disclosure: I am/we are long T. 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.