A US wireless company AT&T (NYSE: T) tarnished its reputation with poor and expensive acquisitions since 2014 that plagued the stock for nearly a decade.
Finally, AT&T had to face the music. To its credit, AT&T made some tough decisions, including selling its media assets and reducing its dividends, to help pay off huge debt.
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Today, AT&T stock is in a better place. But is it time to fully buy into AT&T’s turnaround?
AT&T has made improvements to its business fundamentals
Sometimes, a picture can say a thousand words. Below, you’ll see how much AT&T’s debt has fallen since it peaked in early 2022.
Now, there is still work ahead. That said, AT&T’s debt is back to investment grade, with a BBB rating emerging S&P Global.
Additionally, AT&T’s dividend has returned to a strong financial position, with a payout ratio of only about half of AT&T’s estimated 2026 earnings. That leaves room for management to increase the dividend, which already yields 4.4%.
AT&T’s focus on connectivity pays dividends
Few people would mistake AT&T for a growth stock, but the company posted strong results for the first quarter of 2026.
AT&T continues to add pay phones to its growing US wireless network, with 294,000 additions. That’s down from the 324,000 added last year, but comes after three consecutive quarters of at least 400,000 additions.
The wireless business, combined with home Internet services, forms an advanced communications division for AT&T, which is driving successful growth. Segment revenue grew 3.6% year over year in the first quarter, while EBITDA (earnings before interest, taxes, depreciation, and amortization) grew 5.6%.
Ultimately, AT&T’s attempt to become a media company failed, no doubt because it interfered with its core telephone and Internet businesses. Now that AT&T has refocused on what it does best, business is booming.
Should investors buy this switch today?
Being short, yes. AT&T is a solid price today, and here’s why.
Today, AT&T stock trades at less than 11 times its estimated 2026 earnings. However, management expects earnings per share to grow at a double-digit annual rate through 2028. Wall Street analysts agree; estimates call for 11% to 12% annual growth over the next three to five years.
That makes AT&T’s valuation too expensive for the potential growth to come. Plus, investors get that sweet 4.4% return, and expected growth is almost guaranteed to keep rising.
Add it all up, and AT&T is an excellent budget stock that retirees or other cash-oriented investors can count on, and expect strong growth going forward.
Should you buy stock in AT&T right now?
Before buying stock in AT&T, consider the following:
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions and recommends S&P Global. The Motley Fool has a policy of disclosure.
AT&T: Should Investors Buy the Revolution? was first published by The Motley Fool
