Talk about a missed connection. Wall Street hung up on AT&T (NYSE:T) yesterday, sending the shares 8% lower after a rough quarter. The telco giant failed to impress investors in its first full quarter with Time Warner under its belt, as dish-cutting DIRECTV users nipped at any potential enthusiasm given the strong showing on the wireless front.

AT&T coming within pennies of taking out the 52-week low it established this summer -- a six-year low if you don't adjust for dividends -- is brutal. The silver lining here is that AT&T is a Dividend Aristocrat, pushing its payout higher annually for 34 consecutive years. In a few weeks, it should stretch that streak to 35. The stock's been lower, but the yield -- clocking in at a hearty 6.59% as of Wednesday's close -- hasn't been higher. 

AT&T ad for Our Thing with the telco's logo in a blue cloud of dust.

Image source: AT&T.

Reach out and clutch someone

These are challenging times for AT&T. It's done an admirable job of pivoting away from its legacy landline business, but writing big checks for DIRECTV and more recently the $110 billion deal for Time Warner that closed in June have yet to prove popular with investors. Again, back out the chunky dividend checks that have been cut over the years and you have to go back to the springtime of 2012 to find the last time that the shares were lower. 

Revenue rose 15.3% to $45.7 billion, but the lion's share of that growth came from the freshly acquired Time Warner assets. On a pro forma basis, comparable revenue rose a mere 0.2% as gains at WarnerMedia and its thriving mobility segment were nearly offset by declines at its entertainment group, wireline business, and Latin American operations. A 0.2% uptick on the top line may not seem very exciting, but it breaks a streak of seven straight quarters of year-over-year declines. Thank you, Time Warner.

This was supposed to be AT&T's moment to shine, showing off what it could do with a full three quarters of its new $110 billion toy. It did just fine on that front. WarnerMedia was accretive to earnings, adding $0.05 a share to the bottom line for the quarter. But it wasn't enough. Instead of wowing the market, AT&T left them wondering about the continuing defections at DIRECTV -- where 49,000 net adds for its DIRECTV Now streaming platform were undercut by 346,000 net cancellations in traditional video. There are also now safety concerns at CNN.

The good news is that AT&T's fat yield is more than sustainable in the near term. AT&T is sticking to its guidance of adjusted earnings of $3.50 a share and $21 billion in free cash flow for all of 2018, more than covering its quarterly distributions. It would be a shock if the payout doesn't get hiked before the end of the year. 

AT&T didn't put out a great quarter, and it didn't help that the market tanked and CNN headquarters had to be evacuated following a bomb scare. It's still not where it has to be, and revenue would've taken a hit for the eighth quarter in a row if it weren't for the Time Warner acquisition. However, that beefy 6.6% dividend is real and sustainable -- and that alarm bell the bears are hearing may actually be a dinner bell.

Rick Munarriz owns shares of AT&T. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.