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.

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

Image source: AT&T.

AT&T has made strides in business fundamentals

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.

T Total Long Term Debt (Quarterly) data by YCharts

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%.

AT&T's focus on connectivity is paying dividends

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.

Should investors buy this turnaround today?

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.

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.