Dividends are the multifunction pocket tool of the investor. You can use them in various ways, including as a source of income to pay your bills, or you can supercharge your investment returns by reinvesting them into more shares. It takes patience and commitment to a dividend strategy to get the ball rolling, but once it gets going, the results can be impressive.

Telecommunications giant AT&T (NYSE: T) is a great dividend stock. You'll have difficulty finding yields higher than the 7% it offers at today's share price. And it's not hard to generate $1,000 a year in passive income by investing in it.

There are multiple paths to get to that destination. Of course, a more significant initial investment would be the most straightforward. AT&T's current dividend pays quarterly. Hold the stock through four quarters, and you'll get a total of $1.11 per share. To generate $1,000 in dividends in year one, you'd need to buy 901 shares.

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Source Fool.com