The telecommunications 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. Many telecom stocks have consistent, predictable earnings and pay reliable quarterly dividends.
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Telecom stocks often trade at very reasonable valuations, making them attractive defensive plays during periods of market volatility. In addition, a number of telecom stocks have been rolling out 5G global networks after years of heavy upgrade investments.
Here are eight telecom stocks that the Morningstar analyst team recommends that pay at least a 3% dividend:
| Stock | Dividend yield |
| Verizon Communications Inc. (ticker: VZ) | 6.9% |
| AT&T Inc. (T) | 5.9% |
| Deutsche Telekom AG (DTEGY) | 3.2% |
| BCE Inc. (BCE) | 6.4% |
| Orange SA (ORAN) | 6.3% |
| Vodafone Group PLC (VOD) | 8.7% |
| Rogers Communications Inc. (RCI) | 3.2% |
| Telenor ASA (TELNY) | 7.9% |
Verizon Communications Inc. (VZ)
Verizon Communications is the largest U.S. wireless carrier. Analyst Michael Hodel says Verizon’s recent growth numbers have been underwhelming, but the stock is undervalued at current levels. Verizon reported 217,000 net postpaid phone customer additions in the fourth quarter, its highest subscriber growth of 2022. However, the company also lost 392,000 customers when it shut down its 3G network. Hodel says that Verizon will deliver consistent earnings over the long term and that its dividend is impressive, but the company’s growth will likely be modest. Morningstar has a “buy” rating and $57 fair value estimate for VZ stock, which closed at $38.05 on March 27.
Dividend yield: 6.9%
AT&T Inc. (T)
AT&T is a diversified U.S. telecommunications and technology company. Last year, AT&T received $40.4 billion in cash as part of the spinoff of its TimeWarner assets to Warner Bros. Discovery Inc. (WBD). Hodel says AT&T’s strategy of investing heavily in its networks sets the company up for solid long-term performance. AT&T plans to extend fiber services to 30 million homes by the end of 2025, an effort that Hodel says will allow AT&T to better serve these locations and enhance wireless coverage. Morningstar has a “buy” rating and $25 fair value estimate for T stock, which closed at $18.87 on March 27.
Dividend yield: 5.9%
[SEE: 8 Best Defense Stocks to Buy Now]
Deutsche Telekom AG (DTEGY)
Deutsche Telekom is the leading telecom provider in Germany. The stock has been a top performer over the past year, generating a total return of 31.3% as of March 27. Analyst Javier Correonero says Deutsche Telekom’s decision to forgo investing in fiber-to-the-home, or FTTH, and instead upgrade its copper networks in Germany has allowed the company to upcharge customers for faster broadband speeds and generate industry-leading revenue growth in its German fixed-line business. In addition, Deutsche Telekom owns a roughly 50% stake in U.S. wireless leader T-Mobile US Inc. (TMUS). Morningstar has a “buy” rating and $26 price target for DTEGY stock, which closed at $23.60 on March 27.
Dividend yield: 3.2%
BCE Inc. (BCE)
BCE is Canada’s largest communications company, providing integrated telecom services via its wholly owned Bell Canada subsidiary. Analyst Matthew Dolgin says BCE’s impressive wireless market share growth isn’t translating to wireline sales growth, but its stock is undervalued nonetheless. The company added 63,000 net new internet subscribers in the fourth quarter and 200,000 in 2022, an impressive 5% annual growth. Dolgin says BCE is Canada’s leading wireless provider, but the company may have limited opportunity to grow average revenue per user given the fiercely competitive market. Morningstar has a “buy” rating and $50 fair value estimate for BCE stock, which closed at $44.43 on March 27.
Dividend yield: 6.4%
Orange SA (ORAN)
Orange is the leading telecom provider in France. Correonero says Orange has been the primary builder of fiber optics in France, which has set the company up to generate better unit economics over time. In the past decade, Correonero says Orange has maintained earnings before interest, taxes, depreciation and amortization (EBITDA) margins, generated modest revenue growth and reduced costs in the French market. He expects more of the same from Orange moving forward. Orange is also reportedly in discussions to merge its underperforming Spanish assets with MasMovil. Morningstar has a “buy” rating and $14.50 price target for ORAN stock, which closed at $11.81 on March 27.
Dividend yield: 6.3%
[Read: Best Tech Stocks to Buy This Month.]
Vodafone Group PLC (VOD)
Vodafone is a leading telecom company in Germany, Italy and Spain. The stock is down 30.2% in the past year as of March 27, the worst performance of any stock on this list. Correonero says the stock is attractively valued and investors should buy the dip. He says Vodafone has very strong organic growth in Africa and the Middle East and should benefit from growing disposable income in those regions over time. Germany is Vodafone’s largest market, which Correonero says is a positive given Germany’s historic price stability. Morningstar has a “buy” rating and $15 fair value estimate for VOD stock, which closed at $10.91 on March 27.
Dividend yield: 8.7%
Rogers Communications Inc. (RCI)
Rogers Communications is one of the three largest national wireless carriers in Canada. The company is attempting a CA$20 billion ($14.7 billion) merger with Shaw Communications Inc. (SJR), but the deal has faced pushback from Canada’s Competition Bureau on antitrust grounds. Rogers has said it is committed to making whatever concessions are necessary to complete the deal, but Dolgin says the proposed acquisition will be value-neutral for investors if it is completed. Dolgin says Rogers’ momentum in wireless subscriber growth and its improvements in operating efficiencies should continue in 2023. Morningstar has a “buy” rating and $55 fair value estimate for RCI stock, which closed at $45.96 on March 27.
Dividend yield: 3.2%
Telenor ASA (TELNY)
Telenor is the leading telecom provider in Norway. Correonero says Telenor has been raising prices in its Nordic market to offset higher inflation costs. He says the company has significant pricing leverage and can continue to raise prices without losing subscribers, thanks to its dominant market share in Norway. Correonero says Telenor’s business is mature and growing slowly, but it generates significant free cash flow that it uses to fund its capital returns. Looking ahead, increased wireless data consumption in Asia is a key growth driver for Telenor. Morningstar has a “buy” rating and $14 fair value estimate for TELNY stock, which closed at $11.75 on March 27.
Dividend yield: 7.9%
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8 Top Telecom Stocks to Buy With Healthy Dividends originally appeared on usnews.com
Update 03/28/23: This story was previously published at an earlier date and has been updated with new information.
