What happened

Shares of AT&T (T -0.18%) rose 18.8% in October, according to data from S&P Global Market Intelligence.

The telecom company, whose shares have been beaten down for much of this year, reported earnings on Oct. 20. But in contrast to the negative sentiment swirling around the company, AT&T beat expectations for both revenue and earnings, while raising its full-year guidance.

So what

For the third quarter, AT&T posted overall revenue of $30 billion, down 4.2% over the prior year, while adjusted (non-GAAP) earnings per share of $0.68 beat expectations by $0.07.

Don't let the negative revenue mark fool you, as the overall top line was obscured by spinoffs and divestitures. Overall revenues grew 3.1% on a like-for-like basis, and the underlying drivers of AT&T's wireless business were strong. Mobile service revenues increased 5.6%, while AT&T added a solid 708,000 post-paid phone subscribers.

Consumer broadband was only up 1.6%, but within that, AT&T's new fiber-optic offerings were up 30%. Of course, that is offsetting a 12% decline in legacy broadband offerings, but fiber connections likely have a much higher price.

AT&T also generated a health $3.8 billion in free cash flow, which will help fund its ample 6% dividend and help make a dent in its $131 billion in debt. However, that debt load is much less burdensome, now that AT&T offloaded a large chunk of its debt to Warner Bros. Discovery (WBD 0.92%) in the spinoff of its entertainment assets back in April of this year.

Now what

With the spinoff of Warner Bros. Discovery behind it, it appears AT&T is executing better now that it is focused on its core connectivity offerings. The company is investing in 5G and fiber connections, which appear to have a solid runway for growth and premium pricing. That seems to be a good sign AT&T can continue to grow. 

Though not without strong competition in both 5G wireless as well as broadband, the solid quarter seemed to go over well with analysts. Raymond James analyst Frank Louthan upgraded the stock to a "strong buy" following earnings, citing its better recent execution versus its fellow dividend-paying competitor Verizon (VZ -0.20%).

Telecom stocks aren't the most exciting in the world, but at a 6.7 P/E ratio and with this high a dividend, AT&T may be worth a look for yield-seekers as part of a diversified dividend portfolio. Still, both AT&T and Verizon have to contend with T-Mobile, which has the lead in mid-band 5G deployment, and which also posted a very strong quarter of its own, as well as the cable companies that are using Verizon's wholesale network to bundle wireless plans with their broadband offerings very cheaply.

It's a good sign that AT&T is executing well and that it has offloaded the burdens of debt and its entertainment segments. As long as it keeps executing, there's no reason he stock can't go up and keep paying investors that juicy dividend; however, the good quarter doesn't mean competitive concerns are put to rest.