For many years, AT&T (T 1.02%) was a dependable dividend stock. But recently, investors soured on the stock as a potential income investment.

The company's acquisition of Time Warner in 2018 and its ambitions of being a big global media company didn't pan out and created a lot of confusion around where the company was headed. The company even ended up reducing its dividend payment in 2022. And even as WarnerMedia is now part of Warner Bros. Discovery and AT&T is back to focusing on telecom, investors appear understandably hesitant to give AT&T stock much of a chance. With interest rates on the rise, investors looked elsewhere, like Treasury bonds, to generate recurring income.

But in recent months, AT&T's stock has been on the rise again. Is this a sign that investors are finally coming back? Is now the time to buy this beaten-down dividend stock?

Why AT&T's stock rallied

Since August, AT&T's stock is up 20%. A big reason for that is likely to do with the company's earnings results. For the fourth quarter, which covered the last three months of 2023, the company's revenue totaled $32 billion and rose by 2% year over year. AT&T's bottom line was also back in the black as impairment charges didn't weight down its numbers as they did a year ago. In Q4, AT&T's operating income was $5.3 billion compared with a $21.1 billion loss in the prior-year period.

In October, when AT&T released its third-quarter numbers, the company raised its guidance for free cash flow as a result of strong revenue and subscriber numbers. And then last month, it released its Q4 and full-year numbers for 2023, which showed free cash flow of $16.8 billion topping the guidance it hiked in October ($16.5 billion). For 2024, the company projects that free cash flow will be even higher, between $17 billion and $18 billion.

This is great news for dividend investors as AT&T pays approximately $8 billion in cash dividends over the full year. Not only does that suggest the dividend is safe, but there may even be room for an increase down the road.

The strong financial results likely alleviated some concerns for investors, leading to some bullishness in recent months.

Why the stock could go higher this year

Despite the stock's recent gains, AT&T's value could continue to climb even higher in the months ahead. The stock still offers a high yield of 6.6%, which is more than four times the S&P 500 average (approximately 1.4%). At that high of a yield, it's bound to draw in some investors, especially if interest rates come down this year. With multiple rate cuts potentially on the table for 2024, bond investors may soon be moving back into the equity markets, and a top-yielding stock such as AT&T could make for a prime target for its high payout.

Then there's also AT&T's low valuation. At less than 9 times its trailing earnings, the stock is a cheap buy. Rival Verizon Communications trades at a multiple of 14. For value investors, AT&T's stock offers a good margin of safety.

Should the markets struggle this year, AT&T could be a good stock to pile money into.

Should you buy AT&T stock?

It has been a tough road for AT&T stock, which is still down 24% over the past five years. But with the company on more solid financial footing and no longer worried about balancing a streaming service in addition to paying dividends, it should be a much safer buy in the future.

AT&T can make for an attractive investment to add to your portfolio before interest rates start to come down, as that's when demand for the stock could really take off. For income investors, now is as good a time as any to buy shares of AT&T.