4 Reasons AT&T Is Still a Great Buy in 2017
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4 Reasons AT&T Is Still a Great Buy in 2017

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In 2016, telecom giant AT&T Inc. (T) beat the market by delivering gains of more than 20% for its shareholders. However, the ride is far from over for AT&T stock and the firm makes for a worthwhile pick for income investors.

T stock has seen very little movement so far in 2017 as investors suss out whether the company will be allowed to go through with its Time Warner Inc. (TWX) acquisition under the Trump administration. Whether you believe the merger will happen, AT&T stock boasts solid financials and a great dividend, making it a good addition to a long-term portfolio.

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Prices and data are from the original InvestorPlace story published on February 6, 2017. Click on ticker-symbol links in each slide for current prices and more.

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4 Reasons AT&T Is Still a Great Buy in 2017 | Slide 2 of 6

Income You Can Count On

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One of the big reasons to buy and hold AT&T stock is the company’s 4.66% dividend yield. Not only is this one of the highest yields in the industry, but it’s unlikely to disappear anytime soon. T stock has a robust business with plenty of free cash flow, not to mention the fact that the company has been increasing its dividend for the last 33 years. For those reasons, investors can be pretty confident that AT&T stock will provide a steady stream of passive income for years to come.

SEE ALSO FROM KIPLINGER: 5 Telecom Stocks Paying Big Dividends

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4 Reasons AT&T Is Still a Great Buy in 2017 | Slide 3 of 6

A Solid Performer

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It’s no secret that telecoms are caught in the middle of a difficult transition period as streaming gains momentum and legal and ethical questions about how the internet should be governed arise. However, AT&T has proven that it is able to change with the times by introducing a streaming service and laying the groundwork to create a faster 5G network that supports the public’s reliance on mobile browsing.

In the fourth quarter, some of T’s rivals reported troubling forward guidance and worrisome subscriber figures. AT&T on the other hand, was able to meet expectations and its subscriber numbers indicated a positive trend with its wireless churn rate — the subscribers that stop using T services falling.

SEE ALSO FROM INVESTORPLACE: Why Square Inc (SQ) Stock Is Starting to Pick Up Its Groove

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4 Reasons AT&T Is Still a Great Buy in 2017 | Slide 4 of 6

Trump Effect

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While President Trump may negatively affect AT&T stock by blocking the TWX merger, the Commander in Chief could give the company a boost in the coming year as well. Trump’s tax reform plans will probably take the corporate tax rate down to 20% or lower from its current 35% rate. This will benefit T stock specifically because unlike many of its peers, AT&T pays a tax rate of around 34%.

Many U.S. firms have been able to whittle their effective tax rates to below 20% already, so a Trump tax cut will do very little to bring in excess cash. However, for firms like AT&T whose tax rates are considerably higher, the tax reform may make a significant difference.

SEE ALSO FROM KIPLINGER: The Best Dividend Stocks in the Dow Averages

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4 Reasons AT&T Is Still a Great Buy in 2017 | Slide 5 of 6

Merger Enthusiasm

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Some of the reason for T’s gains in 2016 was the excitement surrounding the proposed merger between AT&T and Time Warner. The two telecom heavyweights would create a pretty powerful combination that would likely increase shareholder value. However, many are worried that the Trump administration will block the deal from going through, which has taken some of the shine off of T stock.

While Trump has spoken negatively about the deal, it's important to realize that his rhetoric doesn’t necessarily translate into action. Some believe that a big part of Trump’s issue with the merger has to do with his personal feelings about CNN and the way the news network covered the election. That means that AT&T may be able to sidestep Trump’s concerns by spinning off CNN.

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In any case, if Trump does OK the acquisition, T stock investors will be able to enjoy the renewed enthusiasm over the deal as the firm’s share price is likely to see another lift.

SEE ALSO FROM INVESTORPLACE: 7 Tech Stocks With Explosive Growth Potential

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4 Reasons AT&T Is Still a Great Buy in 2017 | Slide 6 of 6

The Bottom Line on T Stock

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AT&T stock has a lot going for it. Not only could investors be gearing up for a potential merge with TWX, but the firm’s solid performance and impressive dividend payment are enough all on their own to make T stock a good long-term buy.

This article is by Laura Hoy of InvestorPlace. As of this writing, she did not a hold a position in any of the aforementioned securities

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