Is AT&T Stock a Great Dividend Investment or a Value Trap?

AT&T (NYSE:T) stock is down 16% this year. Investors appear spooked that Space Exploration Technologies Corp is looking to make Starlink a large mobile carrier, one that could potentially disrupt the entire telecom sector and lure customers away from AT&T and other providers.

Amid the concerns, the telecom stock has been falling sharply and is now trading around its 52-week low and at a dirt cheap forward price-to-earnings multiple of just eight, which is based on analyst expectations.

Earlier in the year, things looked much more promising for AT&T, which at one point hit highs of more than $29. Has the market overreacted, and is AT&T a great dividend stock to buy right now, with its yield at 5.3%, or is it just a value trap?

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It could be years before Starlink becomes a major rival

SpaceX CEO Elon Musk plans to make Starlink a major player in telecom in the near future. But according to one executive, it could take years for that to happen. Verizon CEO Dan Schulman told investors recently that not only will it likely cost hundreds of billions of dollars, but that it could take at least four years, and even then, the service may not be a game changer: "It will basically look and feel like every other network. There's no magic wand. There's no secret sauce. There's no shortcut."

Meanwhile, SpaceX is also spending and investing heavily in artificial intelligence and space travel. Its efforts and resources will be stretched. While Musk's ambitions are lofty, Starlink isn't likely to pose a significant risk to AT&T's business anytime soon. And even then, it may not necessarily prove disastrous to its operations.

AT&T recently posted its third-quarter numbers, which were solid, as revenue totaling $32.3 billion was up 5.3% year over year. The company says it was "its best consolidated service revenue growth in more than four years."

The stock looks like a steal of a deal right now

AT&T's stock is trading near multi-year lows, with the market looking to have overreacted to the risk related to SpaceX. Investors have been bearish on the stock, and that could prove to be a mistake.

With a low valuation and the dividend stock offering a yield that's close to five times the S&P 500 average of 1.1%, investors can get tremendous value from the stock today. Not only can there be significant long-term upside, but investors can accumulate plenty of dividend income from AT&T's stock.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.