Telecom stocks are reliable dividend investments.
Telecommunications stocks aren’t typically the type of investments that are going to make you rich overnight. But for long-term investors looking for safety, stability and reliability in their portfolio, telecoms can make for excellent investments in an unpredictable market. An ongoing health crisis, historically high global debt levels and an uncertain U.S. political future have many investors searching for blue chip stocks to buy. Most telecom stocks have high dividend yields and consistent, predictable earnings, two attributes that are particularly appealing with interest rates now near zero. Here are seven telecom stocks to buy today, according to Morningstar.
AT&T (ticker: T)
AT&T is the largest U.S. telecom. The company recently reported 645,000 net new phone subscribers in the third quarter, far surpassing analyst estimates for a 9,000 net subscriber loss. Analyst Michael Hodel says AT&T’s $85.4 billion 2018 buyout of Time Warner was a strategic misstep given media and telecommunications aren’t complementary businesses. However, Hodel says AT&T’s wireless business has tremendous scale advantages and a deep national network infrastructure. AT&T shares pay about a 7.6% dividend. Morningstar has a “buy” rating and $37 fair value estimate for T stock.
China Mobile (CHL)
China Mobile is the world’s largest mobile operator with more than 946 million subscribers. Analyst Dan Baker says China Mobile has one of the strongest balance sheets of any company in the world, including a net cash position of $58 billion at the end of last year. That balance sheet provides investment flexibility and has allowed China Mobile to beat competitors to the punch by updating and expanding its network. Baker says profit growth will likely reaccelerate once its 5G investment phase is complete in 2022. China Mobile pays a 5.8% dividend. Morningstar has a “buy” rating and $52 fair value estimate for CHL stock.
América Móvil (AMOV)
América Móvil is a telecom company headquartered in Mexico that is primarily focused on Latin America and the Caribbean. Hodel says América Móvil is a great way for investors to gain exposure to Latin America as long as they can stomach the political, regulatory and economic uncertainty associated with the region. América Móvil’s Mexican business is its largest and most important. Mexico represents about 30% of total revenue and profits, and the company holds more than 60% Mexico market share. América Móvil pays about a 4.2% dividend. Morningstar has a “buy” rating and $18 fair value estimate for AMOV stock.
BCE is Canada’s largest telecommunications company and the owner of Canada’s top TV broadcaster (CTV) and sports network (TSN). Analyst Matthew Dolgin says BCE is well-positioned to navigate a difficult 2020 and remain a long-term industry leader. The company has been heavily investing in upgrading its network by extending fiber to the home, or FTTH, which Dolgin says will likely help the company gain market share from competitors. In addition, he says FTTH will reduce operating costs and increase BCE’s pricing power. BCE pays a 6% dividend. Morningstar has a “buy” rating and $49 fair value estimate for BCE stock.
Vodafone Group (VOD)
Vodafone is a global telecom company primarily focused on European markets, such as Germany, Italy and Spain. Hodel says Vodaphone is an undervalued work in progress with a strong portfolio of core assets and opportunities to grow cash flow and unlock value for investors. Vodafone received roughly $2.3 billion as part of its restructuring of 11,000 Indian wireless tower assets, and Hodel says the company could potentially spin off its 50,000 European towers in 2021. Vodafone pays about a 7% dividend. Morningstar has a “buy” rating and $24 fair value estimate for VOD stock.
Orange is the top fixed telephone and wireless service provider in France. Analyst Andreea Matysiak says Orange’s service bundles and high-quality networks give the company a competitive advantage at the high end of its markets, where customers are more loyal and Orange generates more revenue per user. In April, Orange cut its dividend by 28.5% due to the health crisis, but the post-cut yield is still a sizable 3.9%. Orange has also said it plans to return to its previous dividend in fiscal 2020. Morningstar has a “buy” rating and $18 fair value estimate for ORAN stock.
China Telecom Corp. (CHA)
China Telecom has more than 111 million fixed-line subscribers, 153 million broadband subscribers and 336 million mobile subscribers. Baker says China Telecom’s 5.5% services revenue growth and 6.2% profit growth in the third quarter outpaced the growth numbers of its Chinese telecom peers. Baker is projecting 5% annual operating income growth over the next five years. China Telecom’s share of the mobile services market in China has grown from 12% in 2012 to 20% in 2019, according to Baker. China Telecom pays about a 4.3% dividend. Morningstar has a “buy” rating and $59 fair value estimate for CHA stock.
Morningstar recommends these telecom stocks:
— AT&T (T)
— China Mobile (CHL)
— América Móvil (AMOV)
— BCE (BCE)
— Vodafone Group (VOD)
— Orange (ORAN)
— China Telecom Corp. (CHA)
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