AT&T: It's all about the dividend

Ma Bell's plan to buy T-Mobile may still technically be on life support. But make no mistake, AT&T's stock looks pretty dead.

If AT&T has to pull the plug on the deal -- leaving that pretty T-Mobile spokesgirl looking for another corporate gentleman caller (paging Sprint!) -- it may be tougher for Ma Bell to compete as effectively with its top rival Verizon. But analysts said that as long as AT&T keeps paying that big, fat dividend, investors may not care. AT&T's annual dividend is $1.72 a share. That works out to a yield of nearly 6.2%. To put that in comparison, it's more than triple the puny 2% or so that you get from holding onto a 10-year Treasury bond. And despite all the problems facing Ma Bell -- slow growth, more competition, and a relative paucity of spectrum for its 4G network, to name a few -- it looks like AT&T is a safer bet than the U.S. government. It costs AT&T about $10.2 billion to pay its annual dividend to all its shareholders. That's a lot of money. But consider that AT&T generated $12.4 billion in free cash flow in just the first nine months of the year. So while not being able to buy T-Mobile would be a blow, it's not significant enough to cause any questions about the safety of the dividend.