Few deny that the current market contains considerable uncertainty: a subprime mortgage and related asset default issue which seeks a solution, declining corporate earnings, high energy prices and a wary consumer have put investors and citizens on guard.

Sound business decisions in these choppy waters require research, careful planning and verve, and on Tuesday, AT&T (NYSE: T) may have accomplished just that.

AT&T announced that it would buy back $15.2 billion of its stock, and also said it would increase its quarterly dividend by 12.6% to 40 cents from 35.5 cents. AT&T's shares surged $2.02 to $39.92 Tuesday at mid-day on the news.

The company also set a long-term target of 30 million subscribers by 2010 for its TV service, which is delivered over phone lines.
"This latest dividend increase, combined with the new share repurchase authorization, reflects the strength of AT&T's operations, and our board's confidence in the future of our business and our ability to continue to deliver strong results," AT&T CEO Randall Stephenson said in a statement. "AT&T has great assets in a growth industry, and we're excited about the opportunities we have to continue to grow our business while also delivering value to shareowners."

Stock Analysis: AT&T's buyback action Tuesday is a clear statement by the company that it believes its stock is undervalued. AT&T's shares have failed to break through resistance at/around $43, and have generally traded in a $34-$40 range for more than six months. T's P/E of 20 is not low, but given the company's impressive iPhone agreement with Apple (NASDAQ: AAPL) -- T signed 2 million iPhone customers last quarter -- and solid Reuters consensus F2007/F2008 earning per share prospects of $2.77/$3.17, one could argue that T should trade higher. The company's increased dividend and buybacks should help convince the Street of that thesis.