A Dividend Aristocrat is any stock that has raised its payout for 25 or more consecutive years. There's only a few dozen stocks that meet that criteria, and AT&T (NYSE:T) is one of them -- the telecom giant has reliably raised its dividend in each of the last 30 years.

For investors looking to generate income, consistent dividend payers can serve as ideal members of a portfolio. AT&T, in particular, stands out among its peers -- at 5.2%, AT&T is one of the highest-yielding Dividend Aristocrats.

Demand for connectivity is growing
The number of Internet-connected devices is expected to grow significantly in the coming years, and the data sent over networks should increase exponentially. AT&T -- with its wireline and wireless assets -- could be poised to benefit.

AT&T, along with its chief rival Verizon, is one of the largest providers of wireless services in the nation. Last quarter, it finished with 116 million wireless subscribers, up from 107 million in the same quarter the year before. The increasing popularity of 4G LTE-connected devices, and the corresponding increase in demand for wireless Internet, has allowed AT&T to raise its subscribers' bills -- wireless data billings rose nearly 20% annually last quarter. In terms of broadband Internet, AT&T is also a major player -- its high-speed U-Verse service has 11.5 million subscribers.

The paid-TV business isn't experiencing nearly as much growth, but generates consistent cash flow, and AT&T is set to become one of the biggest players in that industry. U-Verse TV has 5.9 million subscribers, and assuming government regulators approve the merger, AT&T will add another 20 million or so with its acquisition of DirecTV (NASDAQ:DTV). It might not be America's largest paid-TV provider, but it will still be massive, and the combined company should have numerous cost synergies. At the same time, AT&T should be able to offer customers more competitive, bundled services, pairing its wireless phone service with DirecTV satellite in markets where U-Verse isn't available.

But competition is intensifying
But AT&T is threatened by increased competition: Its failed bid for T-Mobile has sparked something of a price war in the wireless industry, and AT&T's margins are suffering as a consequence. In the second quarter, AT&T's wireless operating income margin fell to 24.1% from 27.1% in the prior year.

It doesn't seem likely that the demand for AT&T's wireless services will go away anytime soon, but the company could be forced to lower its prices further to stem subscriber losses. So far, those losses have not materialized -- AT&T has continued to add subscribers in the face of growing competition -- but margin pressure is a real threat to AT&T's business in the medium term.

Can AT&T continue to raise its dividend?
But as a Dividend Aristocrat, investors are likely focused on one question: How sustainable is AT&T's dividend?

AT&T currently has dividend payout ratio of 54%, meaning that it's only paying out a little more than half of its earnings in the form of dividends -- suggesting a relatively safe payout with room to improve. At the same time, it generates a sizable amount of free cash flow -- $3 billion last quarter -- but only pays out a portion in the form of dividends -- $2.4 billion.

Over the last 30 years, there have been numerous economic disruptions and three recessions, and yet AT&T has managed to reliably raise its dividend throughout them all. Of course, there are legitimate risks to AT&T's business, and investors might do better holding one of its rivals, but among the few Dividend Aristocrats, AT&T appears to be a solid investment.

Sam Mattera has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.