AT&T’s Cashflow Machine Offers an Attractive 4.5% Yield

AT&T Inc. offers a 4.5% yield at an attractive valuation as it generates over $16 billion in free cash flow while continuing to build ultrafast wireless and fibre-optic networks.

AT&T’s reliability as an income generator is the primary argument for owning this stock. Despite heavy investment in 5G and fiber infrastructure, the company generated $4.9 billion in free cash flow in the latest quarter alone, easily covering its dividend commitments. With a full-year free cash flow target of over $16 billion, the dividend is not only appears very safe, but is also well-positioned for future modest increases. For income-focused investors, this offers a rare combination of high yield and defensive stability in a volatile market environment.

And by selling its final stake in DirecTV and acquiring premium spectrum and fiber assets, the company has successfully refocused the business on its core competency: connectivity. The consistent growth in postpaid phone subscribers (adding 405,000 this quarter) and the Mobility revenue rise demonstrate that this pure-play strategy is working. As data consumption skyrockets with AI and video applications, owning the critical “pipes” (both wireless and fiber) provides a wide competitive moat.

Meanwhile, the stock trades at just 11.0 times the company’s forward earnings forecast for the next fiscal year.

AT&T INC. (New York symbol T; www.att.com) is the largest wireless (cellphone) carrier in the U.S., with 118.98 million subscribers (excluding mobile devices such as tablets) as of September 30, 2025. It also has 14.49 million high-speed Internet users and provides traditional telephone services to consumers and businesses.

The company is now buying the Mass Markets fibre-optics business of Lumen Technologies Inc. (New York symbol LUMN), which provides high-speed Internet service to 1 million subscribers in 11 U.S. states.

AT&T will pay $5.75 billion. After the purchase, the company expects to sell a portion of this business to an undisclosed equity partner.

The purchase will let AT&T expand its fibre-optic services in major cities like Denver, Las Vegas, Minneapolis-St. Paul, Orlando, Phoenix, Portland, Salt Lake City and Seattle. It also advances the company’s plan to double its fibre-optic reach to 60 million locations by the end of 2030.

AT&T continues to benefit from its plan to focus solely on its main telecom businesses. As part of that strategy, in April 2022, the company merged its WarnerMedia entertainment business with Discovery Inc. to form Warner Bros. Discovery (Nasdaq symbol WBD). At that time, AT&T shareholders owned 71% of the new firm. The company also received $40.4 billion in cash as part of the deal.
[ofie_ad]

As a result of the spinoff, AT&T cut its annual dividend rate from $2.08 a share to $1.11. That new rate still gives you a high 4.5% yield.

In the three months ended September 30, 2025, AT&T added 405,000 new wireless users and 288,000 net new Internet subscribers (net of cancellations). However, strong competition and promotional deals cut its average monthly revenue per wireless user by 0.8% to $56.64.

Revenue in the quarter rose 1.6%, to $30.71 billion from $30.21 billion a year earlier. That missed the consensus forecast of $30.87 billion. Earnings before unusual items were unchanged at $0.54 a share, which matched the consensus estimate.

AT&T’s strong free cash flow supports an attractive dividend yield

AT&T continues to build out its ultrafast 5G wireless and fibre-optic Internet networks. It plans to spend $22 billion to $22.5 billion on network upgrades in 2025.

The company also expects its free cash flow (regular cash flow less capital expenditures) will range between $16.0 billion and $16.5 billion in 2025. That easily covers this year’s aggregate common dividend payments of roughly $8.0 billion. AT&T also plans to buy back $20 billion of its shares through 2027.

For all of 2026, AT&T will probably earn $2.23 a share and the stock trades at just 11.0 times that estimate.

Due to the spinoff of its media business and subsequent dividend cut, AT&T’s dividend in the past five years has declined by an average 11.8% annually. Even so, the company’s TSI Dividend Sustainability Rating remains Above Average.

Recommendation in Dividend Advisor: AT&T Inc. is a buy.

Copy
Link copied
Email
Print

Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

Find 5 Safe Stocks to
Buy & Hold for Long-Term
Growth and Steady Income

No Credit Card Required

SEND ME THIS FREE REPORT

Testimonials

The cornerstones of Pat’s strategy–value, diversification and timelines–make his newsletter, The Successful Investor, highly profitable while minimizing risk. His advice is no-nonsense, down-to-earth and based on solid research. You’ll know what to invest in and what to avoid.

Chuck Chakrapani, PhD
Investors Association of Canada
The older I get the better dividends look. For retirees and would-be retirees who want to sleep at night, I can’t think of a better source of information on reliable growing dividend income than Pat McKeough’s newsletter, Dividend Advisor.

Jonathan Chevreau
Financial Post Columnist
As a manager of more than $500 million in mutual funds, I have access to the best brokerage research available in this country. But I still take time to read Pat McKeough’s premium newsletters

John Sartz
I appreciate the 25 years of above market returns I received by following your advice. at least 95% of my investment decisions were based on TSI recommendations.

Chuck J.
Subscriber since 1996. Inner Circle Member Since 2006
The newsletters I receive in Inner Circle Pro are fantastic! I have been following Pat’s advice for years and everything he has said has been amazing. His commentaries are brilliant, insightful, educational, rational and balanced. My returns are almost double the TSE and I have referred many of my friends who have switched over to your services.

Walter H.
Inner Circle Pro subscriber

Free Reports

5 Best Stocks to Buy This Month

The Successful Investor Approach to AI Investing

7 Winning Strategies for Dividend Investors

The Best Blue Chips for Canadian Investors

The ETF Investor’s Handbook

The Canadian Guide on How to Invest in Stocks Successfully

Power and Profits of Energy Stocks

Juniors to Giants: The Complete Guide to Mining Stocks

How to Find the Best Growth Stocks

7 Pro Secrets to Value Investing

Browse Topics

Blue Chip Stocks

Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

Dividend Stocks

Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

Value Stocks

What are value stocks?

One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

Growth Stocks

Growth stocks are companies that are likely to have sales and earnings growth well above market average. Frequently they pay few, if any, dividends. Instead they typically reinvest any extra cash flow to promote further growth. Chosen wisely—according to Pat McKeough’s advice—high-quality growth-oriented stocks can be worthwhile additions to most well-diversified portfolios.

ETFs

What are ETFs?

ETF is an acronym for exchange traded fund.. These exchange traded funds are used to track indexes as closely as possible, since investors cannot actually buy an index outright.

How To Invest

Pat McKeough has been making investing for beginners simple—and profitable—by helping investors make big gains for more than 25 years. His advice to beginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over the five main economic sectors (Resources, Manufacturing, Finance, Utilities and Consumer). Pat also believes investors should avoid stocks in the broker/media limelight and focus on those with hidden or little-noticed assets.

Wealth Management

Wealth management is the practice of putting your savings to work so that it continues to grow over your lifetime and will also benefit your heirs. Wealth management encompasses many different areas of investing like long term investment planning and retirement planning.

AI Investing

Artificial intelligence (AI) is essentially the merging of today’s big computing with big data. This has resulted in breakthroughs in everything from creating machines to recognize faces with more accuracy than a human, to the development of chatbots able to collect, organize and simplify all the Internet has to say on any topic.

Spinoffs

One of the ways a company can try to unlock its own hidden value is by creating a separate company out of a corporate subsidiary. The parent company can either sell stock in the new company to the public, or spin it off—hand the stock out to its own investors.

Penny Stocks

A penny stock in general trades for under five dollars a share, and as the name implies, sometimes for pennies. Most of the time they’re young companies, or start-ups in speculative markets like mining or technology.

Mining Stocks

Mining stocks are investments in companies that produce or explore for minerals. Some of these minerals include uranium, coal, molybdenum (which is used in steelmaking), copper, silver and gold. They are affected by fluctuating commodity prices in addition to their own business and operating risks.

Energy Stocks

What are energy stocks?

Businesses that work in the extraction, refining and delivery of energy sources such as natural gas, oil, uranium and coal, are considered energy stocks.