A sector applauded for its dividends.
For dividend seekers, low-risk sectors with reliable revenue streams are attractive. That includes consumer staples companies that can depend on sales of items like toilet paper or toothpaste, utility stocks that provide electricity and telecommunication stocks that provide wireless data and internet access. In decades past, telecom stocks may not have been considered in the same class as low-risk utility investments that provide reliable performance even in tough times. But now, communication is vital to American businesses and families — and thus a nearly sure-thing investment for your portfolio. Telecom stocks are a great place to find stability, plus a reliable place for above-average dividends. Here are seven to examine.
Verizon Communications (ticker: VZ)
Verizon is a logical start for a telecom dividend quest. VZ operates America’s largest wireless network with more than 150 million subscribers. It also owns the dominant FiOS fiber optic network. And, thanks to its acquisition of AOL in 2015 and Yahoo in 2017, Verizon also represents one of the largest digital content providers on the web. There isn’t much room to grow given VZ’s entrenched network and current $220 billion market capitalization. However, the stock earns steady revenue, which is why Verizon posted a gain in 2018 while the broader stock market declined.
Current yield: 4.3 percent
If you’re looking at investing in the No. 1 cellphone carrier, you should also consider the No. 2 network. AT&T is only a hair behind Verizon with more than 140 million wireless customers. It also has a unique television footprint from its acquisition of DirecTV in 2014 and AT&T’s $85 billion bid for Time Warner media properties, including HBO and CNN, won preliminary approval in 2018. This is another stable telecommunications company with a rich history of dividends, riding 34 consecutive years of increasing payouts.
Current yield: 7.1 percent
China Mobile Ltd. (CHL)
AT&T and Verizon are well-known companies, but there’s another $200 billion telecom with big income potential that remains undiscovered by most U.S. investors despite being the largest wireless network in the world as measured by total customers. That would be China Mobile, a state-run corporation with a staggering 900 million customers. There are risks to investing in this company given its government ownership, however, there is also a great deal of potential thanks to the relatively young nature of the wireless market in China. That makes CHL an interesting mix of growth and dividends for investors who aren’t afraid of Chinese stocks.
Current yield: 4.5 percent
If you to split the difference between an established telecom with big dividends and an emerging market play with a bit of growth, Spain’s Telefonica offers the middle ground. The company provides wireless communication and fiber optic internet access across Europe, but also has a footprint in Latin America. Just beware that while this stock has a robust and reliable dividend, in Europe companies pay dividends a bit differently. Payouts fluctuate based on profit trends and distributions come twice a year instead of the quarterly dividends posted by most U.S. dividend payers.
Current yield: 5.4 percent
Another international play but one that’s a bit closer to home is Montreal-based communications company BCE. With a nearly $40 billion market capitalization, the company provides wireless data, landline internet access and TV service. Though its cellular footprint is smaller than U.S. companies, with just 9 million wireless customers, it is still the largest telecom in Canada. What makes BCE interesting, however, is that it continues to incrementally improve revenue trends even as American telecoms remain stuck in neutral or looking to grow through acquisitions. Long-term investorsinterested in dividends will find this characteristic quite attractive.
Current yield: 5.7 percent
A domestic telecom that offers tremendous dividend potential is CenturyLink, one of the highest yielding stocks in the S&P 500. Part of the reason the dividend yield is so high is share prices have been challenged and CTL stock holds some real risk. The company took on massive debt to finance its 2017 acquisition of competitor Level 3 Communications for $25 billion. With rising interest rates and an already difficult outlook, many investors are concerned those dividends may not last long. Still, it won’t take long for the payouts to add up at the current rate that is more than four times the typical S&P stock.
Current yield: 14.3 percent
Crown Castle International (CCI)
Real estate investment trust Crown Castle is a different way to invest in telecoms. As a REIT, the company must deliver 90 percent of its income back to shareholders as dividends. Crown Castle is one of the largest operators of cellular towers and fiber optic networks in the U.S. It rents this network infrastructure to carriers, providing steady revenue that fuels its consistent dividend payments. There’s not much growth potential, but there is much less risk since CCI doesn’t have to worry about keeping subscribers like other telecoms. CCI stock also posted a small gain in 2018 in a difficult market.
Current yield: 4.3 percent
7 Solid Telecoms to Buy for Dividends
To recap, here are seven telecommunications stocks that income investors should consider buying for dividends.
— Verizon Communications (VZ)
— AT&T (T)
— China Mobile Ltd. (CHL)
— Telefonica (TEF)
— BCE (BCE)
— CenturyLink (CTL)
— Crown Castle International (CCI)
The Vanguard Communication Services ETF (VOX) was trading at $74.29 per share on Thursday afternoon, down $0.75 (-1.00%). Year-to-date, VOX has declined -17.76%, versus a -7.72% rise in the benchmark S&P 500 index during the same period.
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