AT&T's (T +1.26%) stock turnaround has been one of the more surprising happenings in the stock market over the past 12 months. Its stock is up by around 52% in that span and has nearly touched its five-year high.
Its sudden switch from consistent disappointment to being one of the higher-performing stocks in the S&P 500 has left many wondering whether this is just a phase, or if AT&T has what it takes to continue delivery in the long term.
If you're like me, I believe it has what it takes. The company hit a long rough patch, no doubt, but recent developments give me hope for its future. Here are three reasons AT&T is a good long-term move for investors in 2030 and beyond.
NYSE: T
Key Data Points
1. AT&T has refocused on its core telecom business
In 2018, AT&T took on an ambitious plan to enter the media and entertainment business. At the time, there was hope that it could work out as a way to integrate content and distribution and drive subscriber growth. AT&T bought Time Warner for $85 billion and was seemingly all in.
In retrospect, this will go down as one of the worst missteps in the company's long history. After skyrocketing debt and operational challenges, AT&T cut ties with its misguided ambitions, getting rid of its WarnerMedia interest in a $43 billion spinoff in April 2022.
Since then, AT&T has gotten back to its core telecom roots, and it has been working out in its favor. It's adding phone and fiber customers at an impressive rate. Margins are improving, cash flow has steadily increased, and it has paid off $45 billion in debt since its current CEO, John Stankey, took over in July 2020.
T Total Long-Term Debt (Quarterly) data by YCharts.
2. AT&T will continue to operate with few direct competitors
The telecom industry isn't an easy business for newcomers to enter, and that's putting it lightly. There are expensive fixed costs for building and maintaining networks, and plenty of regulatory hurdles that require licenses and government approvals. It takes a wide reach to make the costs and hassle remotely worth it.
That's why AT&T has been operating (and will likely continue to operate) in a duopoly or triopoly in most of its markets. In wireless, its biggest competitors are Verizon Communications and T-Mobile, and in many places, its biggest cable competitors are more local or regional companies.
There being only a couple of other companies that can operate relatively close to its scale sets AT&T up for longevity. This is especially true as it continues to build out its fiber network, which is expensive and time-consuming, further increasing its competitive advantage.
The telecom industry has become a central part of everyday American life. As long as the industry continues to operate as a virtual duopoly or triopoly, AT&T should see sustained success in 2030 and beyond -- especially with its current momentum.
3. AT&T's dividend is becoming more attractive
AT&T has routinely had one of the more attractive dividends in the S&P 500. It slashed its dividend by close to half in early 2022, and even after that, it maintained a yield of around 6% to 7% before its recent stock price run.
AT&T's new yield is more modest at around 4.2%. Investors should have more confidence in the company's ability to sustain it, after wondering if it would slash it further or cut it altogether due to its debt obligations and expensive investments it needed (and continues to need) to make for expansion.
T Dividend Yield data by YCharts.
With a healthy free cash flow, the concerns about AT&T's dividends have quieted down. Its free cash flow in 2024 was $17.6 billion, while it only paid out $8.2 billion in dividends. Not too shabby.
We've also reached the point where AT&T has discussed a plan to spend $20 billion on share buybacks over the next three years. This is a signal that AT&T is confident in its current financial standing, and in the direction its finances are headed.
Every company has hiccups and hits rough patches, but an above-average dividend like AT&T's makes it a lot easier for investors to stomach those periods. It's a great selling point for a company you're eyeing for the long haul.
