With interest rates still near their historic lows, dividend investing is back en vogue in a big way. While there are plenty of great dividend stocks on the market today, my pick as the best income stock is telecom giant AT&T (T 0.77%).

While not necessarily the most inventive idea, AT&T offers investors an incredible mix of current yield, a rich history of dividend payments, and a strong competitive position. Let's examine these aspects of AT&T's investment thesis in closer detail.

AT&T's huge yield

The headline dividend stats for AT&T should jump off the page to investors. The telecom giant's shares currently yield an impressive 5.1%. Contrast this against the current 1.9% yield for the S&P 500 or the 2.3% yield on 10-year Treasury bonds, and the true impressiveness of AT&T's income-producing power comes into sharper contrast. However, this isn't the only way that AT&T distinguishes itself as a dividend stock.

The company has established an elite track record of consecutive annual dividend increases. In fact, the company has done so for 32 straight years, earning it the vaunted title of a Dividend Aristocrat. Companies in this group have a well-established history of outperforming the market in terms of total returns.

If there had to be one detractor to AT&T's prominence as a dividend stock it would be that the company hasn't grown its payouts fast enough. Over the past decade, the telecom giant has increased its dividends per share at an annual average rate of just 3.2% per annum.

Also worth noting, the company's 95.1% payout ratio seems to imply that AT&T might not have much more room to increase its dividends in the years to come. However, it's important to remember that companies fund dividends from cash flows, not GAAP profits. As such, the $40.6 billion in cash flows from operations that AT&T has generated over the past 12 months stands significantly higher than the $12.6 billion in net income from the same period. More importantly, AT&T's future growth outlook should allow the company to continue to grow its revenues and profits in the years to come.

A person stacks an increasingly tall column of coins, suggestive of the kind of wealth accumulation that can occur by holding income stocks like AT&T.

Image Source: Getty Images.

Future looks bright

The telecom sector appears set to undergo some rather dramatic changes in the years ahead, and fortunately for AT&T shareholders, the telecom giant appears nicely positioned to benefit from these shifts. The lynchpin cementing AT&T's competitive positioning lies in its pending acquisition of entertainment powerhouse Time Warner (TWX). The $85.4 billion deal should allow AT&T to be among the first names to launch its own mobile cable offering in which consumers can stream their favorite TV programming directly to their wireless devices over wireless networks.

For those unfamiliar with it, Time Warner controls vaunted content assets, including HBO, CNN, TBS, TNT, Warner Bros. Studios, and much more. A large portion of the channels that Time Warner controls are seen as essential to the modern cable bundle, so owning Time Warner's content assets should help AT&T negotiate the additional rights needed to stream cable over-the-top to wireless services as technology investments like 5G wireless infrastructure come on line in coming years.

As one of the few companies positioned to offer wireless cable bundles in the coming years, AT&T seems well positioned to offer competitively priced service bundles. This, in turn, should help grow both the company's subscriber base and its average revenue per user (ARPU), an important industry metric.

Of course, all of this should serve as a tailwind to AT&T's status as an elite income investment. In fact, AT&T says the Time Warner buyout will prove accretive to its adjusted-earnings per share and free cash flow per share in the first year after the deal closes, which should be later this year. When you consider the additional long-term benefits the deal should provide, it doesn't take an overly active imagination to see that AT&T should be able to continue to lavish its investors with a steady and growing stream of dividends into the foreseeable future.