AT&T (NYSE: T) is our top dividend play for the next five years. We have been covering it from a number of different angles. Perhaps the most interesting of the discussions surrounded our analysis regarding the impact of FirstNet, which everyone is ignoring and this is a critical mistake. You see, this is a catalyst for growth, but make no mistake, this is still a dividend champion and that is the primary reason it is among our top long-term recommendations, particularly as the stock pulls back from $40 once again. Now, we previously predicted on a number of occasions that AT&T would hike its dividend to $0.50 by 2018. As expected, the dividend was hiked by another penny quarterly.

What is interesting is that many readers on our home site and here at Seeking Alpha assailed this dividend hike, because as the bears correctly argue, cash really needs to be directed at reducing debt. However, the dividend, and the reliable annual dividend hike is a reason many own this name. This remains an ongoing debate here at Seeking Alpha. That is, can AT&T really keep raising the dividend?

We contend yes, and that is why it is not dead money. In addition, the debt is painful, but the investments being made will ensure future revenues. With the DirecTV purchase and the pending Time Warner (TWX) purchase, there are strong sources of revenues, now and in the future, but the company has been saddled with debt. That is reality and so as much as we enjoy a pay raise, for the long-term health of the company, this debt needs to be paid down. By paying this debt down, while still upping its dividend payout by the way, the stock is incredibly attractive.

Of all of the names in the sector, this is the one want to own because of the yield and the prospects for share appreciation. Any growth is a bonus, but it is not infrequent to hear bears call this name “dead money.” In this article we would like to demonstrate why a long-term position is anything but “dead-money” but also discuss the safety of the dividend.

The Power of The Dividend

Is the stock dead money? Absolutely not. To demonstrate this point we can look at returns. While the future is unknown, we thoroughly expect both capital appreciation as well as continued dividend hikes. Still, the stock would be a big long-term money maker even if the stock was stagnant for 30 years, given the healthy 5.3% dividend yield. Don’t believe us? Well let’s run some numbers, shall we? Take a look at the 10-year price history of AT&T:

Source: Yahoo Finance

As we can see above, AT&T’s share price has not seen strong appreciation over the years, at least not compared to many other growth names or even the S&P 500. AT&T is well below its all-time high, despite the benchmarks seemingly making new highs every week. This is one reason some argue AT&T is dead money. It is true growth is slow. But you simply cannot forget about the dividend. Does this mean it is dead-money? We suppose someone who bought at the very top is down on paper, aren’t they? Let’s look at some numbers. Take a look at the past ten years of historical dividend payouts with three hypothetical buyers during this same time period. What we want to do is run some tests to see if there is any way someone who has been in this name for a few years has lost money, even if they bought at a terrible time. Take a look at the dividend history of AT&T over the last ten years.