AT&T

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First up is AT&T ( T), a stock that's held the title of the highest-yielding Dow component for quite some time. As I write, the firm pays out a hefty 5.27% dividend yield. AT&T is one of the biggest communications firms in the world, with nearly than 95 million wireless customers, 30 million landline customers and 16 million internet subscribers. That huge installed base gives AT&T some big advantages when it comes to selling bundled services to its existing customer Rolodex.

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It may sound surprising, but AT&T recently got a big valuation boost from its top rival, Verizon ( VZ). That's because Verizon is overpaying considerably to obtain complete ownership of its wireless unit from Vodafone ( VOD). Basically, the firm is shelling out $130 billion for the 45 million customers that fall into VOD's share of the business. At the same time, AT&T's 95 million customers and entire fixed line business is being valued by the market at just $180 billion. That's an insane mispricing, and it still hasn't been worked into share prices months later.

AT&T has a great history of rewarding investors. The firm generates substantial free cash flows each quarter -- and with interest rates near zero right now, it typically allocates most of its cash to pay investors through dividends and stock buybacks. With AT&T trading at a big discount to Verizon, now is a good time to think about being a buyer.

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