AT&T (NYSE:T) has long struggled to connect with investors. For years, the stock has stagnated as increased competition, high costs, and an evolving marketplace took a toll on company revenue.

However, these challenges help AT&T shine for one specific type of stockholder -- the dividend investor. The dividend stock includes a generous payout poised to move higher. Moreover, as it reclaims some market power through 5G, AT&T's growth should not only help income investors, but it could also begin to offer better stock performance.

AT&T as a dividend stock

AT&T's current dividend stands at $2.08 per share, giving new buyers a yield of more than 7%. Moreover, AT&T has hiked the payout for 35 straight years, making it a Dividend Aristocrat.

Because stocks gain significant investor interest from the Dividend Aristocrat status, AT&T is unlikely to surrender this position except in an extreme circumstance. This is a sort of perfect storm for income investors, as AT&T will probably increase the payout every year despite the elevated yield.

The company can easily afford the dividend. In the latest quarter, AT&T generated free cash flow of almost $8.3 billion, making its quarterly dividend payment of just over $3.7 billion sustainable.

A roll of $100 bills adjacent to a mounted stick holding up a sign that says "DIVIDENDS."

Image source: Getty Images.

Nonetheless, at a forward P/E ratio of about nine, its multiple reflects financial struggle, at least for now. Revenue declined by 3% in the latest quarter due to declines in its entertainment group and business wireline revenue.

This led to a 22% drop in diluted earnings per share. Analysts predict a 2% increase in income next year, and although this is an improvement, it will likely not stoke multiple expansion in the near term.

AT&T's difficulties

This stagnation gives some investors a good reason to consider disconnecting AT&T. The stock trades at a level that it first reached in 1995! Even today, it sells at approximately half the price it peaked at during the height of the dot-com bubble more than 20 years ago.

T Chart

T data by YCharts

Since that time, investors have suffered as the company's landline business lost its monopoly power. Its pay-TV business has also met the same fate in recent years. Additionally, with competition from T-Mobile, both AT&T and rival Verizon have seen their pricing power diminished. AT&T has also had to invest tens of billions to keep pace with the massive technological changes in the wireless industry and maintain its position.

Despite this difficulty, one could argue that the only thing worse for AT&T than wireless spending is its expensive efforts to expand into new markets.

For one, it bought Time Warner, which was subsequently rebranded as WarnerMedia. That placed AT&T in competition with the likes of Netflix and Disney in the content business. AT&T also purchased DIRECTV, right before the pace of cord-cutting began to accelerate.

DIRECTV's numbers continue to fall, and activist investor Elliott Management has been pressuring AT&T to sell it. According to a recent report by CNBC, AT&T is working to sell a portion of DIRECTV and other pay-TV businesses. However, the company has not officially announced such a move.

AT&T could regain market power

Amid all of these struggles, AT&T may have come full circle. Due to the high cost of building a 5G network, Verizon and T-Mobile are its only 5G-related competitors. This makes AT&T, if not a monopoly, at least an oligopoly.

Also, now that Apple has released a 5G iPhone, the technology's adoption should begin to take off in earnest. More customers will benefit from 5G speeds of about 300 megabits per second (Mbps), which is exponentially faster than 4G, whose speeds range from 12-36 Mbps.

An analysis by Allied Market Research predicts the 5G technology market will grow at a compound annual growth rate of 122% through 2026. Such a technological change could spawn technologies not yet imagined, let alone invented, so predicting the magnitude of 5G growth remains challenging.

For all of AT&T's problems, the high yield and continued payout growth backed up by its Dividend Aristocrat status will ensure the stock remains an income powerhouse. Additionally, if 5G helps the company better connect with investors, stockholders will not only see higher income but possibly a long-overdue upgrade in the stock price.

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.