AT&T: Should Investors Buy Into the Turnaround?

U.S. wireless company AT&T (NYSE: T) tarnished its reputation with ill-fated and expensive acquisitions beginning in 2014 that haunted the stock for roughly a decade.

Eventually, AT&T had to face the music. To its credit, AT&T made difficult decisions, including selling its media assets and slashing its dividend, to help pay down a massive debt load.

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Today, AT&T stock is in a much better place. But is it time yet to fully buy into AT&T's turnaround?

Sometimes, a picture can say a thousand words. Below, you'll see just how much AT&T's debt has come down since peaking in early 2022.

Now, there's still work ahead. That said, AT&T's credit has recovered to investment-grade, with a BBB rating from S&P Global.

Additionally, AT&T's dividend is back in a strong financial position, with a payout ratio that is only about half of AT&T's estimated 2026 earnings. That leaves room for management to increase the dividend, which already yields 4.4%.

Few people will mistake AT&T for a growth stock, but the company posted strong results in the first quarter of 2026.

AT&T continues to add postpaid phones in a mature U.S. wireless landscape, with 294,000 net additions. That's lower than the 324,000 added a year ago, but it comes on the back of three consecutive quarters of at least 400,000 additions.

The wireless business, combined with home internet services, forms AT&T's advanced connectivity segment, which is effectively driving growth. The segment's revenue grew by 3.6% year over year in the first quarter, while EBITDA (earnings before interest, taxes, depreciation, and amortization) grew by 5.6%.

Ultimately, AT&T's attempt to become a media company failed, arguably because it detracted from its core phone and internet businesses. Now that AT&T has refocused on what it does best, the business is thriving.

To be short, yes. AT&T is a strong buy today, and here's why.

Today, AT&T's stock trades at less than 11 times its estimated 2026 earnings. However, management expects earnings per share to grow at a double-digit annualized rate through 2028. Wall Street analysts agree; estimates call for 11% to 12% annualized growth over the next three to five years.

That makes AT&T's valuation very inexpensive for the growth likely to come. On top of that, investors get that sweet 4.4% dividend, and the anticipated growth almost ensures it will continue rising.

Put it all together, and AT&T is an excellent dividend stock that retirees or other income-focused investors can count on, and even expect some solid growth from moving forward.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.

AT&T: Should Investors Buy Into the Turnaround? was originally published by The Motley Fool