The debate about whether AT&T (NYSE: T) or Verizon Communications (NYSE: VZ) is the better dividend stock has been long running among income-focused investors. The two telecommunications giants have a lot in common, but they're also beginning to diverge meaningfully when it comes to evolving their businesses -- and investors continue to weigh AT&T's aggressive push into the entertainment space, superior yield, and big debt against Verizon's more focused push into Internet of Things, 5G, and services, lighter exposure to the television industry, and stronger position in the mobile wireless space.

Each stock has its pros and cons, and a case could be made for either one as the superior investment. However, owning both AT&T and Verizon is a way to build diversified exposure in a space that will be at the center of technology, information, and entertainment trends in the coming decades -- while collecting big dividend payouts.

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AT&T

Data sources: AT&T, Yahoo! Finance, Dividend.com. FCF and earnings payout ratios based on results over the trailing-12-month period and forward annualized payout.

The telecom industry is facing pressure on multiple fronts. Cord-cutting trends have dampened profits in cable and satellite TV, and the standardization of unlimited data packages is hurting pricing power in mobile services. The sector as a whole is low growth, but the leaders in the space typically generate great free cash flow, and AT&T remains an attractive income investment as a result.

The company has America's second-largest wireless network (trailing only Verizion in subscriber numbers) and the largest paid-television user base. There's a good chance it will be able to leverage its brand strength, service bundling advantages, and newly integrated Time Warner wing to continue building on its stellar dividend growth history. Adding new connections for Internet of Things devices and reestablishing a substantial performance advantage with 5G compared to budget-price offerings could also be positive catalysts for the company and help extend its 34-year history of annual dividend growth.

Payout increases have been small in recent years, but AT&T's stock already boasts a whopping 6.7% yield, and the Time Warner acquisition should improve its dividend coverage even though the purchase has also elevated the company's debt. Paying down the debt is a priority and suggests that payout growth will continue to be slow, but its current distribution is well covered. Comments from management suggest that AT&T expects to generate more than $21 billion in free cash flow in the current fiscal year, and that's without factoring in a contribution from the Warner businesses, which brought in roughly $4.6 billion in FCF in 2017.