Steadily adding quality, income-generating stocks to your portfolio at opportune prices is perhaps the single best, most dependable way to build wealth over the long term. 

Within that mold, AT&T (T -1.40%) and Hanesbrands (HBI -1.75%) are two income-generating stocks from my own portfolio that I think stand out as appealing buys at current prices. Here's why. 

A bar chart.

Image source: Getty Images.


Yield Years of Uninterrupted Payout Growth Payout Growth Over the Last Five Years Free Cash Flow Payout Ratio
6.6% 34 10.9% 60.8%

Data sources: AT&T; Yahoo! Finance, FCF payout ratio based on 2018 results and forward annualized payout. Table by author.

AT&T's mobile services business is growing at a sluggish clip, but the company's position in the category still looks pretty sturdy. It owns and operates America's second-largest wireless network, and internet communications will only become more central to everyday life. The importance of having high-performance networks will likely also only continue to increase as technologies like connected cars, wearables, smart-city systems, and other Internet of Things technologies become commonplace.

The space will remain competitive, but mobile internet services still present growth opportunities for AT&T. The real problem for the company as of late has stemmed from its troubles in TV land, with cord-cutting subscribers ditching the company's DirecTV packages, weighing on overall performance.

Attempts to stem the losses with its DirecTV Now skinny-bundle streaming service haven't panned out thus far, and the company has yet to put forth a clearly defined strategy on what its future in the video space will look like. Thankfully, AT&T has some great assets to work with, and the stock's massive yield should provide shareholders with some insulation as the company navigates the issue. 

AT&T's position in the entertainment space isn't as strong as Disney's, which has seen its stock climb roughly 35% over the past year thanks in large part to excitement surrounding its entry into streaming. However, the telecom giant is also no slouch, owning plenty of great content and time-tested creative studios as a result of the big Time Warner deal.

The company owns HBO along with its production houses and content, including Game of Thrones, True Detective, and The Sopranos, and studios responsible for leading the creation of conversation-defining television. The Warner Bros. film wing includes franchises like the DC Comics characters. A $1 billion gross for its comic-book movie Aquaman at the end of 2018 shows that Warner's superheroes still have big potential even if DC's movies haven't matched the success of Disney's Marvel franchise.

Other big film properties under the AT&T banner following the Warner deal include the Harry Potter and Fantastic Beasts series, Lord of the Rings, and The Conjuring. Throw in television networks including Cartoon Network, CNN, TBS, and TNT, and a video game wing that seems to be flying under Wall Street's radar after the big merger, and AT&T has a pretty strong position in content.

The challenge will be packaging it optimally and tying these assets together to bolster its mobile and television businesses and take advantage of opportunities like increased ad rates gained through direct-to-consumer, targeted advertising. The company won't create that kind of synergy overnight, but AT&T stock still presents appealing value and a great dividend. Shares trade at roughly 8.5 times this year's expected earnings. 


Yield Years of Uninterrupted Payout Growth Payout Growth Over the Last Five Years Free Cash Flow Payout Ratio
3.5% 0 100% 38%

Data sources: Hanesbrands; Yahoo! Finance, FCF payout ratio based on 2018 results and forward annualized payout. Table by author.

Hanesbrands has doubled its dividend over the past five years, but its annual payout has been flat since 2017. The company has been on an acquisitions push in the past decade as it has looked for new businesses that could kick-start its growth engine. But big purchases in recent years have added debt to the books and put a halt to dividend growth. 

A Champion sweatshirt.

Image source: Hanesbrands.

In addition to acquisitions that improved its position in clothing categories like bras and underwear, the company also bought the rights to the European division of Champion in 2016 -- uniting the brand's business under a single corporate banner. That has proved to be a smart move, as Champion has emerged as a growth driver for Hanesbrands -- picking up steam in key geographic segments over the past few years and spearheading the company's direct-to-consumer sales effort.

Excluding mass-channel retailers like Target and Walmart, Champion brand sales increased 75% year over year on a currency-adjusted basis in its recently reported March quarter. Mass-channel sales for the brand fell 3% year over year, but strong growth for Champion outside that retail category and 16% year-over-year growth for Hanesbrands' overall direct-to-consumer sales helped the company grow overall revenue 8% (and currency-adjusted organic revenue 10% year over year) and keep its comeback on track. 

Last year, the company funneled $400 million in cash flow toward paying down debt. Hanesbrands is now on track to bring its debt-to-EBITDA ratio to 2.9 this year, within the two- to three-times range that the company has been targeting. That should open the door for a return to dividend growth.  

So, even though strict screeners might filter out the company if they prioritize stocks that have delivered steady annual payout growth, Hanesbrands might actually turn out to be a dividend growth stock in disguise. Shares trade at roughly 10 times this year's projected earnings, yield well over 3%, and I expect that they'll deliver substantial capital appreciation and payout growth over the next five years.