Is It Possible To Find Decent Telecom Plays For A Dividend Portfolio?

By: ispeculatornew
Date posted: 04.24.2013 (3:00 am) | Write a Comment  (3 Comments)

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220px-Mobile_phone_evolutionIf you’ve been following my monthly top dividend reports and are a subscriber to my free mailing list, you know that telecom stocks are often at the very top of these lists but I’m more often than not very convinced about staying away. It’s not all about the yield right? I guess that’s true but I’m also trying to build a solid higher yield portfolio which gave me the idea to take a fresh look at the sector. Maybe some of these stocks would actually provide decent yield at a reasonable price. What I did was look at US stocks in the telecom/cellular industry (this includes stocks that are foreign but that trade on US markets) and that yield over 3%. I ended up getting down to 35 names from which I gathered some information but also did a bit more filtering. I removed stocks that:
-have a price under $5 (3 stocks)
-have a payout ratio over 100% (which removes some stocks such as France Telecom (FTE), Verizon (VZ), AT&T (T), WindStream (WIN)

Then, there were 19….

[table “509” not found /]
As you can see, simply removing stocks that pay out more than they can afford to takes out a large portion of the candidates. My other expectation is that many of these companies have slow let’s look at these 19 using a less severe version of my 7-7-7 rule. I’m looking for stocks that have increased revenues, EPS and dividends by 3% on average over the past 5 years.

How many respect each criteria?

EPS growth over 3% for 5 years: 4
Dividend growth over 3% for 5 years: 8
Revenue growth over 3% for 5 years: 10
The big question is how many names fit all 3? Only 2…!! Crazy right? Here are the numbers on those 2 companies:
[table “510” not found /]

Which of these 2 would you add to your dividend portfolio? I personally know a lot more about Rogers and would probably go with that one but I’d love to hear your thoughts!

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  1. Comment by Robert Zaleski — April 24, 2013 @ 8:10 am

    What if you drop Dividend growth? How many then? What’s the yield on those? How many years at the current growth rate till they match?

    It might be that taking the one with the lower payout ratio, yield, and revenue growth but no Dividend Growth is a better play.

  2. Comment by Robber Baron — April 29, 2013 @ 6:17 pm

    Why do you suppose 40% of your group of 35 telecoms have payout rate of over 100% and another 10% over 90%? Could it possibly be that these quasi utilities have a financing model inconsistent with your selection model? Do you really think you are smarter than half of all telecom CEOs and CFOs, most of whom have spent 20 years in that sector?

  3. Comment by IS — April 30, 2013 @ 4:05 am

    @Robber – Certainly possible yes, but it’s also possible that the whole industry is struggling and should not be a core part of a dividend portfolio… are there some names you prefer?

    @Robert- Most of the names had negative dividend growth so that would not have helped as much as you’d hope

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