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4 Terrible Reasons to Sell AT&T Inc. Stock

T Free Cash Flow (TTM) Chart

AT&T (NYSE: T) surged from $32 last November to $43 in July, fueled by robust demand for dividend stocks and its cash flow-boosting purchase of DirecTV. Since hitting that peak, AT&T stock has pulled back to around $37 on various concerns about its future.

T Free Cash Flow (TTM) Chart

Source: YCharts

4. The saturation of the wireless market

AT&T's wireless subscriber base grew by 2.3 million. Much of that growth was fueled by its Cricket prepaid wireless phones and its growing Mexican business. However, AT&T also lost 268,000 mainstream U.S. wireless phone customers due to tougher competition and the saturation of the smartphone market.

But including "other" wireless devices, AT&T mainstream's U.S. wireless subscriber base actually grew by 212,000. Those "other" devices include connected vehicles, which require better stand-alone connections for their infotainment and navigation systems, and autonomous drones, which can fly across AT&T's 4G networks.

Back in January, AT&T announced that it would offer stand-alone conenctions to 10 million Ford vehicles in North America by 2020. The following month, it tested out the world's first LTE-connected drones with Intel . Growth in these adjacent markets -- coupled with its growth in the prepaid and Mexican businesses -- should prop up its wireless business even as its U.S. smartphone subscription rates decline.

The key takeaway

I'm not saying that AT&T has a flawless business strategy, but I believe that the specific fears about higher interest rates, Time Warner, its debt levels, and wireless "losses" aren't compelling reasons to sell the stock.

Instead, investors should focus on the fact that AT&T is trading at a steep discount to the industry while offering a hefty dividend yield which is more than double the S&P 500's average yield of 2.1%. Therefore, I personally plan to tune out the noise and stick with my original plan of holding AT&T for the long term.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of AT and T and Ford. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Ford, and Netflix. The Motley Fool recommends Intel, Moody's, and Time Warner. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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