If you invested $100 in AT&T in 1995, this is how much you would have today.

large telecommunications company AT&T (tea -1.26%) It’s a household name and well-known dividend stock. If you invested $100 in AT&T in 1995, your investment would now be worth $476. Is that okay? Well, you definitely need context. Many investors buy AT&T for its huge dividend, which yields an impressive 6.5% dividend at the current stock price.

But more than just dividends affects investment results. So, let’s take a closer look at AT&T and use its past to determine whether it’s worth owning for the future.

What Difference Dividends Make (or Don’t)

Are you a glass half full or glass half empty type? AT&T grew its initial $100 investment to nearly $500 over the years. However, it includes total returns, share price gains and losses, and dividends paid. If you take out dividends you will lose money!

Dividend optimists might argue that dividends are the difference between losing money and making money. That’s true. But even the total return S&P 500 This would have turned that same $100 into more than $1,200.

T data from YCharts

conclusion? That’s right. Dividends can significantly increase total returns over the long term. This is especially true when reinvesting to strengthen the compound snowball. But there’s a lot more to stocks than dividends. Dividends alone do not make a good investment.

Where AT&T falls short

Now is the time to shift focus and focus on AT&T’s broader business performance. Great companies create value for shareholders over time. This is the most basic definition of a good investment.

So how has AT&T done since 1995? A company’s return on invested capital (ROIC) measures the return generated when investing in that company. High returns mean you can put in your resources and get a lot out of it. AT&T’s business is currently negative ROIC means you destroy value when you invest.

T return on invested capital data from YCharts

Meanwhile, AT&T’s earnings per share have been up and down, but are lower today than they were nearly 30 years ago! Debt has exploded over the years and currently stands at $138 billion.

You can see the slope of each line above, but here are some percentages. AT&T’s ROIC fell by more than 200% and turned negative. Current profits are 20% lower than in 1995. Finally, debt increased by a whopping 1,750%.

AT&T is fundamentally in a much worse situation than it was before, which has a lot to do with the stock’s poor performance.

Are there any right turns along the way?

The company’s debt load peaked after its failed attempt to enter the entertainment media industry with its massive acquisitions of DirectTV and Time Warner, worth tens of billions of dollars. AT&T later spun off those assets and used the proceeds to pay down debt.

This is the first step toward a long-term turnaround, as interest expenses — all $6.5 billion over the past year — have been eating away at AT&T’s bottom line. Cash flow is quite strong, leaving about $12 billion after dividend payments. The balance sheet needs to recover, but it could take at least several years.

AT&T must continue to grow. Analysts expect annual revenue growth of just 3% over the next three to five years. Management must also demonstrate that it can invest AT&T’s funds responsibly. Ideally, great stocks can pay dividends. and It’s still performing well enough to create long-term value and grow. AT&T hasn’t shown enough yet to forgive three decades of mediocrity.