In the past few years, AT&T has invested heavily in its video services. That includes its July 2015 purchase of satellite TV provider DirecTV as well as its new investments in fibre-optic networks.

In addition, the company has now completed its takeover of media giant Time Warner. Big acquisitions like this come with considerable risk. However, Time Warner’s movies and TV shows should help attract more users to AT&T’s wireless and streaming video services.

We feel the Time Warner purchase makes sense, and will let AT&T keep raising its dividend.

AT&T INC. $31 (New York symbol T; Income-Growth Dividend Portfolio, Utilities sector; Shares outstanding: 7.3 billion; Market cap: $226.3 billion; Dividend yield: 6.6%; Dividend Sustainability Rating: Highest; www.att.com) is the largest wireless carrier in the U.S. It also offers traditional phone and satellite TV services.

In June 2018, the company completed its $103 billion cash-and-stock purchase of media giant Time Warner. AT&T plans to use Time Warner content to attract more users to its wireless and TV services.

Thanks partly to the extra cash flow from Time Warner, AT&T raised its quarterly dividend with the February 2019 payment by 2.0%. Investors now receive $0.51 a share instead of $0.50. The new annual rate of $2.04 yields a high 6.6%. The company has now increased the annual payment for 35 consecutive years.

Total revenue rose 23.7%, from $132.4 billion in 2014 to $163.8 billion in 2016. That gain was mainly because AT&T purchased satellite TV operator DirecTV in July 2015 for $48.5 billion (70% stock and 30% cash). Revenue then fell 2.0% to $160.5 billion in 2017. That’s primarily due to declining demand for its traditional landline phone services as more customers switch to cellphones.

However, revenues increased by 6.4% in 2018, to $170.8 billion, thanks to $18.9 billion from Time Warner.

Overall earnings, excluding one-time items, jumped 301.6%, from $6.4 billion in 2014 to $25.7 billion in 2018. Due to the extra shares outstanding following the DirecTV and Time Warner purchases, earnings per share gained just 183.9%, from $1.24 to $3.52.

As a result of the Time Warner purchase, AT&T’s total debt (net of the cash it holds) was $171.3 billion as of December 31, 2018. That’s a high 76% of its market cap.

However, eliminating overlapping operations should let AT&T cut $2.5 billion from its annual costs by the end of 2021. Those savings, combined with sales of surplus real estate and other assets, will let the company cut its debt to $150 billion by the end of 2019.

AT&T spent $20.8 billion on capital expenditures in 2018. It expects those outlays to rise 11% to $23.0 billion in 2019.

A big part of that spending will go to upgrading its wireless networks to 5G technology, which is as much as 100 times faster than current 4G (or LTE) systems. So far, the company has launched 5G service in parts of 12 U.S. cities. By mid-2019, it should have extended that to parts of 19 cities.

AT&T still has plenty of room to keep raising its dividend. In 2019, it expects its free cash flow (regular cash flow less capital expenditures) will total $26 billion. Based on its current dividend rate, those annual payments will total $15.0 billion.

The company will probably earn $3.59 a share in 2019, and the stock trades at a low 8.6 times that forecast.

AT&T is a buy.