Telecom giant AT&T Inc. (NYSE:T), owner of DirecTV, has been a polarizing investment because more and more cable customers lately have turn to subscription services like Netflix Inc. (NASDAQ:NFLX) and questions about how the internet should be classified weighed on the sector. However T stock has proven resilient, maintaining its position at the top of the pack and keeping an eye to the future with strategic acquisitions.

While T stock may be the best in class for telecoms, there is some question as to whether or not the company is worth buying — especially considering the massive spending spree it has been on in recent years.

Back in 2014, AT&T bought DirecTV in a $48.5 billion deal, and the firm shelled out $18.2 billion the following year in order to obtain wireless spectrum licenses. Then in 2016, AT&T agreed to spend $85 billion on its acquisition of Time Warner Inc. (NYSE:TWX)

There are quite a few reasons that acquisitions like these are great for AT&T’s business, especially considering the industry’s upheaval in recent years. However, some are still questioning whether or not T stock is bleeding money and how that will affect stockholders.

What About the AT&T Dividend?

One of the major reasons that people buy T stock, especially with the state of the telecom industry, is the firm’s dividend. AT&T offers a 5.1% dividend yield, which investors have come to rely on. The firm has regularly increased its dividend payments each year for the past 30. However, with all the debt the firm has taken on, many are wondering whether or not the firm will be able to maintain such a hefty dividend payment.

This is definitely something to keep an eye on, especially since AT&T’s payout ratio currently stands at 88%. That doesn’t mean the dividend is going away tomorrow, but it defiantly indicates that cash is getting tight.

However, investors should keep in mind that a payout ratio like that is definitely doable for a period of time, and AT&T is expecting its TWX acquisition to make the firm much more profitable, thus raising cash reserves and making dividend payments a little bit less stressful.

Interest Rates

Another big concern for T stock is interest rates.

Ultra-low borrowing rates have been a major boon for corporations looking to make acquisitions over the past few years and AT&T has benefited massively from the Federal Reserve’s stimulus efforts. However, with the bank expected to raise rates consistently over the next year, some companies may find themselves with loan payments they can no longer afford.

Luckily for T stock, its existing loans are mainly financed with fixed rates so rising borrowing costs won’t be much of an issue. However, the firm will need to get its TWX deal done before the bank raises rates and makes the purchase more expensive.

The Bottom Line for T Stock

AT&T is a good pick in the telecom industry, and although the firm has taken on a substantial debt load over the past few years, those purchases were necessary to take the company forward.

Not only that, but the fact that T was able to take advantage of low interest rates at a time when many of its peers were struggling just to stay afloat speaks volumes about the company’s strength.

If you’re willing to invest in the telecom sector, T stock is a good bet — debt and all. However, it’s important to keep in mind that telecoms are in very uncertain territory at the moment so even the strongest firm carries a lot of risk. There are quite a few other high-yield dividend stocks out there that will provide substantial returns without the risk that T stock carries.

As of this writing, Laura Hoy was long NFLX stock.