AT&T is often considered a classic dividend stock. It’s raised its dividend annually for 36 straight years, making it a Dividend Aristocrat of the S&P 500. It’s one of the largest telecom and pay TV companies in America, and its takeover of Time Warner in 2018 made it a media titan.
AT&T’s massive business, which is on track to generate over $26 billion in free cash flow this year, makes it seem like a safe income investment. The stock currently pays a hefty forward dividend yield of 7.3%, and it looks historically cheap at nine times forward earnings.
However, investors who are thinking about buying AT&T for its dividend should weigh the stock against that of top telecom rival Verizon . I believe three qualities make Verizon a better dividend investment than AT&T — even though it pays a lower forward yield of 4.2%, has only raised its dividend for 14 straight years, and has a higher forward P/E ratio of 12.
1. A better total return
When we compare dividend stocks, the total return — which factors in reinvested dividends — matters more than the current yield. Over the past five years, Verizon has delivered a much higher total return than AT&T
