Income investors often gravitate toward big telecom companies for their sticky ecosystems, wide moats, and strong cash flows. AT&T (NYSE:T) and China Mobile (NYSE:CHL), the largest wireless carriers in the U.S. and China, respectively, both fit that bill.

AT&T's stock rallied more than 30% this year, as its Time Warner acquisition, streaming strategy, and restructuring plans attracted new bulls. But China Mobile's stock tumbled about 20%, as the economic slowdown in China, the unrest in Hong Kong, and government-mandated fee reductions brought on the bears.

A canvas bag labeled "dividends".

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Yet both stocks still pay high yields and look fundamentally cheap. AT&T trades at 11 times forward earnings and pays a forward yield of 5.3%. China Mobile has a forward P/E ratio of 10 and pays an estimated forward yield of 5.2%.

Those low valuations and high yields should set a floor under both stocks, but is one of these telcos a better dividend investment than the other?

Different business models and priorities

AT&T and China Mobile initially look similar, since both companies generate a large percentage of their revenues from their wireless and wireline businesses. Both companies are also struggling with sluggish sales of smartphones.

However, AT&T also faces an ongoing loss of pay TV viewers at DirecTV, which it acquired four years ago, as it attempts to merge its fragmented ecosystem of streaming services to counter OTT services like Netflix. It's also gradually reducing its long-term debt of $153.6 billion -- which was mainly incurred from its acquisitions of DirecTV, Time Warner, and AWS-3 spectrum licenses -- by cutting costs and divesting non-core assets.

The bulls believe AT&T can pull off this balancing act as it streamlines its business, but the bears believe that the telco is biting off more than it can chew.

A visualization of network connections across a city.

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China Mobile is a state-owned enterprise, which sets a broad safety net under its core business but makes it subservient to the Chinese government. Some of the government's decisions -- such as forcing China Mobile and its peers to sell their towers to China Tower and lease them back to cut costs -- boosted the company's profits.

Other decisions -- like forcing it to lower its wireless fees and eliminate data roaming charges to boost 4G penetration rates, or rotating the management between the top three telcos to ensure balanced competition -- throttled its earnings growth. But unlike AT&T, China Mobile isn't burdened with messy pay TV and streaming businesses and a massive debt load.

Different dividend strategies

AT&T has raised its dividend annually for 34 straight years, making it an elite Dividend Aristocrat of the S&P 500 -- a member of the index that has hiked its payout for at least 25 consecutive years.

Over the past 12 months, AT&T's dividend accounted for 90% its earnings but just 51% of its free cash flow (FCF), which received a substantial boost from its takeover of Time Warner. Those payout ratios indicate that AT&T will maintain its Dividend Aristocrat status for the foreseeable future.

Unlike AT&T, which pays quarterly dividends, China Mobile only pays semi-annual dividends. Those payments are set based on a payout ratio of about 40%-50%, but the company doesn't prioritize year-over-year dividend hikes.

China Mobile's annual dividends still rose over the past three years (excluding a special dividend in 2017 to commemorate the 20th anniversary of Hong Kong's return to China), but investors looking for consistent dividend growth will probably favor AT&T.

AT&T is clearly the better dividend investment

AT&T and China Mobile are both expected to post nearly flat revenue growth next year with just 1%-2% earnings growth.

However, AT&T is a better dividend stock than China Mobile for five reasons. It pays quarterly dividends instead of semi-annual ones, it raises its dividend annually, it isn't directly controlled by the government, its financial reports are more detailed than China Mobile's (which obfuscate certain metrics due to its state ownership), and its core market isn't struggling with macro headwinds and geopolitical risks.

China Mobile is still a good long-term investment, but it will likely underperform AT&T until the Chinese economy improves and 5G networks arrive.