AT&T's Stock Split Potential: A Strategic Move to Unlock Value and Boost Accessibility

AT&T (T) has long been a bellwether in the telecommunications sector, but its stock price has languished compared to peers like T-Mobile (TMUS) and Verizon (VZ). Could a stock split—a tool historically used to make shares more affordable—be the catalyst to unlock value for investors? Let's dissect AT&T's historical split patterns, current valuation, and strategic moves to determine whether now is the time to buy.

AT&T's Split History: A Pattern of Liquidity-Driven Moves

AT&T has a history of using stock splits to increase share liquidity. Key splits include:
- 1987: 3-for-1 split.
- 1993 & 1998: Two 2-for-1 splits.
- 2022: A non-integer split of 1.324:1, adjusting for cumulative dilution.

While the last split (March 1998) was over 25 years ago, the 2022 adjustment underscores AT&T's willingness to use splits strategically. Today, with shares trading around $20.43, the price is already low enough for retail investors. However, a split could signal confidence in future growth or align with a broader shareholder return strategy.

Valuation: Undervalued with Strong Cash Flow

AT&T's current valuation metrics suggest it's a bargain.

• P/E Ratio: 16.83 (trailing) vs. a 12.92 forward P/E, implying earnings growth.
• FCF Yield: 9.88%, one of the highest among telecom peers.
• Analyst Consensus: A $28.81 price target (40% upside) and a “Buy” rating from 18 analysts.

The company's dividend yield of 4.05% (vs. 10-year average of 5.5%) and $19.49B in free cash flow highlight its defensive appeal. Even the Zacks “Hold” rating overlooks the compelling risk-reward here: AT&T trades at a 23% discount to its 5-year average P/E.

Strategic Moves: Debt Reduction, 5G, and Fiber Are Driving Growth

AT&T's recent actions confirm its focus on shareholder value:

1. Debt Reduction: Net debt dropped to $119.1B in Q1 2025, within its 2.5x leverage target. This frees capital for buybacks and dividends.
2. 5G & Fiber Dominance:
3. Q1 2025: 324K postpaid phone net adds (churn: 0.83%) and 261K fiber net adds.
4. Fiber Passings: 29.5M locations, with 40% of fiber households also using AT&T wireless.
5. CapEx: $22B in 2025, prioritizing 5G and fiber to boost ARPU.

1. Strategic Divestitures: Selling its 70% stake in DIRECTV to TPG in 2025 will reduce complexity and fuel growth in core telecom.

2. Shareholder Returns: A $40B plan (2024–2027) splits equally between dividends and buybacks. With $3.1B in Q1 2025 free cash flow, this is achievable.

Why a Split Could Still Be in Play

While AT&T's stock isn't cheap at $20+, a split could:
- Increase Accessibility: Even at current prices, a split could make shares more appealing to retail investors.
- Signal Confidence: A split would align with its debt-reduction success and 5G/fiber growth story.
- Mirror Peers: T-Mobile's stock split in 2022 (2-for-1) preceded a 100%+ rally. AT&T's undervalued status makes a similar move logical.

The Investment Case: Buy Now, Split Later

Even without an announced split, AT&T's fundamentals are compelling:
- Dividend Safety: Payout ratio of 68% leaves room for hikes.
- Market Leadership: 5G and fiber are winning customers, with fiber broadband revenue up 19% Y/Y.
- Valuation Cushion: Analysts' $28.81 target implies 40% upside, and the stock's 60% YTD outperformance vs. the S&P 500 suggests momentum.

Final Verdict: A Buy for Income and Growth

AT&T's combination of dividend income, debt reduction, and 5G/fiber growth makes it a standout telecom stock. A split, while not imminent, would amplify its appeal. Investors should act now: Buy AT&T at $20+, collect a 4% yield, and position for upside if a split—or further buybacks—materializes.

Action to Take:
- Buy 100 shares of AT&T (T) at $20.43.
- Target: $28.81 (consensus) or higher if a split fuels momentum.
- Risk: High debt ($145B) and regulatory hurdles in telecom.

In a sector dominated by growth stocks like T-Mobile, AT&T offers a rare blend of stability, dividends, and undervaluation. This is a buy now, hold for years opportunity.