Shares of telecom stalwart AT&T (T 0.71%) experienced a downward trend in recent months. The depressed stock price appears to provide a buy opportunity, particularly if you're interested in AT&T as an income investment, given that the stock sports an attractive dividend yield over 7%.

The share price hit a 52-week low on July 18, after news broke of lead-sheathed cables in AT&T's telecommunications network, stirring up concerns about the potential liability this could create for the company.

Since the stock remains not far from its 52-week low at the time of this writing, does it make sense to buy AT&T shares? After all, the price has fallen despite the broader stock market's recovery from the recent bear market.

To answer that question, you have to weigh whether AT&T makes sense as a long-term income investment. From that perspective, let's take a look at where AT&T stands today.

Factors affecting AT&T's stock price

The lead-sheathed cables in part of AT&T's network may not be cause for concern. According to CEO John Stankey, independent experts "have given us no reason to believe these cables pose a public health risk." But even so, AT&T is working with the U.S. Environmental Protection Agency to resolve the issue.

Facts about the extent of the lead problem, such as cleanup costs, are lacking right now. So an investment decision should be based on the company's performance. One key consideration is AT&T's free cash flow (FCF), which is indicative of the company's ability to fund its dividend.

In the first quarter, AT&T reported $1 billion in FCF. This result contributed to the company's share price decline, since the amount was substantially less than the $2.8 billion generated in Q1 2022.

But that story changed substantially in the second quarter, as AT&T generated $4.2 billion in FCF compared to $1.4 billion in the prior year. As a result, the first half's FCF stood at a much-improved $5.2 billion compared to 2022's $4.2 billion.

The company also expects full-year FCF to reach at least $16 billion, thanks in part to lower capital expenditures. This would be a significant increase from 2022's $14.1 billion.

Other considerations before deciding on AT&T stock

Another factor in AT&T's favor is its position as the largest U.S. telecom company based on wireless subscriptions, commanding a 46% market share compared to second-place Verizon's 29%.

AT&T successfully grew postpaid mobile phone subscribers, the telecom industry's most valuable customer segment, over the years since Stankey became CEO in the summer of 2020. He took total postpaid mobile subscribers from 74.9 million in Q2 2020 to 85.8 million this year, an impressive run of 12 consecutive quarters of customer growth.

Subscriber growth helped AT&T increase first-half revenue this year, rising to $60.1 billion from $59.4 billion in the prior year. Mobile revenue accounted for $40.9 billion of that total.

Despite the successes, one concerning factor is AT&T's massive debt load. The company's net debt stood at $132 billion at the end of Q2. Implementing a 5G network is not cheap. AT&T spent $35 billion over the past three years just to acquire the spectrum needed for its wireless network.

The company is working to reduce its debt while remaining committed to the dividend. AT&T is devoting a portion of its FCF toward debt reduction after paying dividends with the goal of achieving a net debt-to-adjusted EBITDA ratio in the range of 3x by the end of this year, and 2.5x by the first half of 2025.

To buy or not to buy AT&T shares

Along with its focus on debt reduction, AT&T eliminated $6 billion in costs under Stankey's tenure, and committed to cutting another $2 billion over the next three years. This cost reduction further strengthens AT&T's financial health, and improves the company's appeal as an income investment since reduced costs increase the likelihood AT&T can sustain its dividend.

AT&T's FCF situation is looking healthy, and poised to improve over the next few years thanks to cost cutting. The company's consistent trend of customer growth and market-leading share of wireless subscriptions are additional strengths.

Combined with a commitment to both the dividend and to debt reduction, AT&T's dividend looks secure. These factors make AT&T a worthwhile income investment.