Jettisoning its media business back in April, AT&T (NYSE:T) is once again a pure-play telecom stock. Since this spinoff, T stock has jumped higher, moving from the high-$10s to the low-$20s per share. Impressive, given how volatile the stock market has been lately.

Yet, while the market is excited for the “new” AT&T, the excitement is mostly due to an “old” reason. That would be the stock’s high dividend yield. Even as it has cut its rate of payout by nearly half since the restructuring, its yield still looks juicy, as interest rates — although rising — remain below historical norms.

Earlier this month, I detailed the opportunity to buy and re-invest the high dividends from shares in this venerable company. However, that’s not the sole reason why it’s appealing. Although still regarded more as an income play than a growth play, there is meaningful upside potential for T stock.

More Than Just an Income Stock

First off, don’t take what I’m saying here to mean I’m knocking those who are interested in buying AT&T as an income play. Investment objectives differ greatly when it comes to personal portfolio decisions.

For income-focused investors, the T stock dividend yield of 5.3% is attractive. As part of a portfolio of high-yielding stocks, it could provide the cash flow needed to finance one’s retirement. Younger investors can reinvest these dividends, providing solid long-term returns.

Even if the stock fails to really set the world on fire. But here’s the thing, getting back to my point: AT&T shares aren’t necessarily “doomed” to languish like they have over the past decade. Investors interested in capital appreciation can still find opportunities here. Why?

After getting rid of its non-core businesses, and shifting focus completely back to what it knows best — that is, telecom services — the company and its management now have full focus when it comes to making moves that maximize the value of this business. In doing so, this possibly enables shares to make steady gains in the years ahead.

What moves am I talking about? Here are some examples.

Several Paths to Upside With AT&T

When it comes to T stock and long-term catalysts, the first that may come to mind is the rollout of 5G. The 5G revolution is definitely something that will help drive long-term revenue and earnings growth, yet it’s not the only thing in play that could help move the needle.

For instance, even as the company — like every other company — is facing inflationary pressures right now, CFO Pascal Desroches stated last month that AT&T should see margins expand during the second half of 2022. Increased profitability will help justify a higher valuation. It’s likely forecasting higher margins due to two reasons.

First, it’s raising prices in order to keep up with inflation. While there is some risk by doing this, given how essential mobile phones, internet and other telecom services are to modern life, customer churn due to rising prices may not be as severe as with other monthly subscriptions.

Second, AT&T’s margins may be rising due to debt reduction. The media spinoff enabled it to remove more than $40 billion in debt off its books. Not only is this good in terms of net earnings and cash flow, but deleveraging its balance sheet could also justify multiple expansions.

Bottom Line on T Stock

Right now, AT&T shares trade for just 8 times estimated earnings for 2022. Granted, there are some reasons for this. Even as the market has warmed up to it, investors are still cautious about its future. They still have many of the common concerns for it than they did before it spun-off its media business.

However, we’ve established that there is a path to growth, through avenues like 5G. Margins are also expected to rise, to some extent due to deleveraging. As the market continues to fully appreciate that “Ma Bell” is getting stronger, it could climb toward higher prices.

There’s no doubt this is one of the most appealing dividend stocks out there. Investors looking for capital growth shouldn’t pass up on it, either. Whether interested in income, growth, or both, T stock is worth a look.

T stock currently earns a “B” rating in my Portfolio Grader.

— Louis Navellier and the InvestorPlace Research Staff

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Source: Investor Place