AT&T’s balance sheet has come under intense scrutiny following its acquisition of Lumen’s fiber assets and EchoStar’s spectrum licenses. These deals will push the company’s net debt-to-EBITDA ratio to approximately 3.5x by the end of 2026, compared with its long-term target of 2.5x. Management forecasts that free cash flow of roughly $16 billion this year will drive deleveraging back toward the target level over the next three years, but the increased leverage has already prompted at least one major ratings agency to reconsider AT&T’s credit outlook.

AT&T’s Series A and Series C preferred shares currently yield just over 6%, one of the highest levels among investment-grade telecom issues. However, given the elevated leverage and potential for further strategic acquisitions, both securities face a meaningful risk of downgrade to non-investment-grade status. A junk rating could force forced sales by regulated investors and widen spread costs by 150–200 basis points, eroding total return and undermining the perceived safety of these high-yielding instruments.

Investors seeking income with lower credit risk can consider three preferred or baby bond issues rated one notch above AT&T’s current level: • Verizon Communications Series E preferred: 7.2% yield, BBB+ rating, callable in June 2027 • Comcast 6.875% Series A baby bonds: 6.8% yield, A– rating, no call until March 2028 • Crown Castle International Series B preferred: 6.75% yield, A rating, callable in September 2026 Each of these alternatives offers yields that rival or exceed AT&T’s preferreds while maintaining stronger balance-sheet metrics and higher investment-grade ratings.