Shares of AT&T (NYSE:T) plunged 8% to a new 52-week low on Oct. 24 after the telco posted a mixed third quarter earnings report. The company's revenue, boosted by its acquisition of Time Warner (now known as WarnerMedia), rose 15% annually to $45.7 billion and beat estimates by $320 million.

Its adjusted earnings rose 22% to $0.90 per share, but missed expectations by four cents. The bottom line miss was disappointing, especially since WarnerMedia added $0.05 to AT&T's earnings during the quarter.

An AT&T store.

Image source: AT&T.

But after that big drop, many investors are probably wondering if it's safe to buy AT&T for its forward yield of 6.6%. Let's take a closer look at AT&T's dividend and the telco's biggest headwinds to find out.

A classic Dividend Aristocrat

AT&T is a Dividend Aristocrat, a member of the S&P 500 that has hiked its dividend annually for over 25 years. AT&T (known as Southwestern Bell/SBC Corporation before 2005) raised its dividend annually for 33 straight years.

AT&T expects its adjusted EPS to hit the "upper end of the $3.50 range" this year, which would represent at least 15% growth from the previous year. The company currently pays a $0.50 quarterly dividend, which equals $2.00 per share for the full year -- which should be easily covered by its earnings.

AT&T noted that its free cash flow (FCF) rose 17% annually to $6.5 billion during the quarter, and it expects to finish the year with FCF "at the high end of the $21 billion range." That should give AT&T, which spent $12 billion on dividend payments in fiscal 2017, plenty of room to raise its dividend and pay off its long-term debt.

Why did AT&T's stock tumble?

Over the past few years, AT&T struggled with the sluggish growth of its wireless business, declines at its wireline business, and a loss of pay TV users. The company is trying to offset those declines with the acquisitions of DirecTV and Time Warner, but the turnaround -- which relies heavily on bundling strategies -- has been slow.

A group of people use their smartphones.

Image source: Getty Images.

AT&T gained 550,000 phone net adds in the US during the quarter, which consisted of 69,000 postpaid net adds and 481,000 prepaid net adds. That gave it a decent postpaid phone churn rate of 0.93%, which only represents a slight increase from 0.82% in the second quarter. As a result, AT&T's Mobility revenues rose 5% annually to $17.9 billion.

WarnerMedia's revenue (which was included in AT&T's results for the first time) rose 6.5% annually to $8.2 billion, buoyed by the strength of HBO, Turner, and Warner Bros. AT&T also noted that its new advertising business, Xandr, grew its ad revenues by 34% annually (22% excluding the recent AppNexus acquisition).

Yet AT&T's other business units struggled. Its Entertainment Group revenue slid 5% annually to $11.6 billion as the addition of 49,000 new DirecTV Now subscribers failed to offset its loss of 346,000 traditional video subscribers. That business might be revived as AT&T bundles together DirecTV, DirecTV streaming services, HBO, wireless services, and wireline services together, but that strategy could also throttle its near-term earnings growth.

AT&T's Business Wireline revenue fell 4% to $6.7 billion, but the decline wasn't surprising since the company has been pivoting away from the enterprise market. Its Latin America revenues also dropped 12% to $1.8 billion, but the decline was entirely caused by unfavorable currency exchange rates. On a constant currency basis, the unit's revenues actually rose 5%.

AT&T's numbers were a mixed bag, but the big sell-off seems like a knee-jerk reaction exacerbated by a sell-off across the broader market. The earnings miss was disappointing, but AT&T stuck with its previous full-year guidance -- which indicates that the pressure should wane after it fully integrates WarnerMedia and repositions itself as a provider of bundled wireless, wireline, and streaming media businesses.

The bottom line

Some investors might think that AT&T's growth looks disappointing relative to Verizon's (NYSE:VZ). But that's an apples to oranges comparison -- AT&T is evolving into a diversified media giant, while Verizon is expanding more heavily into the online media and internet advertising markets.

At $30, AT&T trades at less than 9 times this year's earnings estimate, while Verizon trades at 12 times this year's earnings. AT&T's yield is also much higher than Verizon's forward yield of 4.2%.

Simply put, investors should still consider AT&T a stable income investment. The stock probably won't rebound significantly over the next few months, but it should continue to pay out reliable dividends for the foreseeable future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.