Analysts recommend these telecom dividend stocks.
The telecommunication sector isn’t typically the first place investors look for high-flying growth stocks. However, telecom stocks can be great sources of long-term upside and reliable dividend yield in an uncertain market. Interest rates remain at historically low levels, leaving income investors with few viable options. Many telecom stocks have consistent, predictable earnings and pay reliable quarterly dividends. Telecom stocks often trade at very reasonable valuations, making them great defensive plays in the event of a market downturn. Here are seven telecom stocks recommended by the Morningstar analyst team that pay at least 2% dividend yields.
AT&T (ticker: T)
AT&T is the largest U.S. telecom company and the parent company of mass media conglomerate WarnerMedia. Analyst Michael Hodel says investor sentiment toward AT&T has been understandably negative for some time given the company’s ill-advised capital allocation decisions that left it saddled with $155 billion in debt. However, AT&T’s HBO Max and Peacock streaming services are gaining momentum, and its studios and networks are among the best content creators in the media space. AT&T pays a 7% dividend yield. Morningstar has a “buy” rating and a $36 fair value estimate for T stock.
Vodafone Group (VOD)
Vodafone is one of the leading telecom providers in Europe, and its main markets include Germany, Italy, Spain and the U.K. Hodel says Vodafone has transformed its business in recent years, including the sale of non-core assets in New Zealand and the initial public offering of its towers business. Vodafone has faced stiff competition, particularly in Spain and Italy. However, Hodel says Vodafone’s asset portfolio is impressive and the company has an opportunity to grow cash flow in coming years. The stock also has a 5.7% dividend yield. Morningstar has a “buy” rating and a $26 fair value estimate for VOD stock.
America Movil (AMOV)
America Movil is a telecom company that operates primarily in Central and South American markets, including Mexico, Brazil and Colombia. Hodel says America Movil has an unmatched scale in the Latin American telecom market. The company is well positioned to rebound from the health crisis, particularly as data demands grow in its primary Latin American geographical service regions. Hodel says the sale of America Movil’s U.S. business provides financial flexibility to take advantage of opportunities in its core Latin American market. America Movil has a 2.5% dividend. Morningstar has a “buy” rating and an $18 fair value estimate for AMOV stock.
BCE is Canada’s largest telecom company. It is the exclusive Canadian provider of HBO Max and owner of 30 TV channels, including top network CTV and sports station TSN. Analyst Matthew Dolgin says BCE is well positioned as an economic rebound trade in 2021. Dolgin says BCE is the gold standard in Canadian wireless, and its network has consistently been rated as Canada’s best. Dolgin says BCE’s high-quality, diversified media unit also differentiates the company from top competitors. BCE pays a 6% dividend yield. Morningstar has a “buy” rating and a $51 fair value estimate for BCE stock.
Orange is the leading telecom provider in France. Analyst Denise Molina says Orange’s Spanish market remained weak in the most recent quarter. Spanish organic revenue was down 8.8% in the quarter. Molina says Spanish weakness is a result of Orange losing more than 100,000 customers in 2020 after setting prices too high. Fortunately, Orange generated 8.3% organic revenue growth in Africa and the Middle East, and Molina says the region will remain a long-term growth driver. Orange pays a 5.6% dividend. Morningstar has a “buy” rating and an $18 fair value estimate for ORAN stock.
Telefonica is the leading telecom company in Spain. Earlier this year, Telefonica sold its Telxius tower infrastructure business to American Tower (AMT) for $9.4 billion. The deal is part of Telefonica’s push to narrow its focus to Spain, Brazil, Germany and the U.K. and reduce its Latin American footprint. Analyst Javier Correonero says the strategy is sound as it reduces exposure to emerging-market risk, increases operational efficiency and provides an opportunity to deleverage the balance sheet via divestment deals. Telefonica pays a 10.2% dividend. Morningstar has a “buy” rating and a $10.20 fair value estimate for TEF stock.
Lumen Technologies (LUMN)
Lumen Technologies is a U.S. telecom company that changed its name from CenturyLink in 2020. Lumen cut its dividend by 50% in 2019 after repeatedly assuring shareholders it would not do so. However, Dolgin says the stock has been “significantly undervalued” for several years. At a recent investor event, Lumen highlighted its fiber network, which could play an increasingly important role as U.S. data and digital communications demand grows in coming years. Even after the dividend cut, Lumen still has a 7.8% yield. Morningstar has a “buy” rating and an $18 fair value estimate for LUMN stock.
Top telecom stocks to buy with healthy dividends:
— AT&T (T)
— Vodafone Group (VOD)
— America Movil (AMOV)
— BCE (BCE)
— Orange (ORAN)
— Telefonica (TEF)
— Lumen Technologies (LUMN)
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7 Top Telecom Stocks to Buy With Healthy Dividends originally appeared on usnews.com