Consider International Telecoms for Big Dividends

Bob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

For most investors, the prospect of buying telecommunications stocks usually involves the familiar U.S.-based giants.  While domestic stocks are certainly a good place to look, there are interesting names to be found within the international telecom sector.  Investors looking for international diversification may want to give these stocks further consideration.

China Mobile (NYSE: CHL) is a $220 billion giant based in Hong Kong.  China Mobile provides telecommunications services primarily in Mainland China.  The company has more than 180,000 employees and serves more than 700 million customers, making it the largest telecom carrier in the world.  The stock looks cheap, with a trailing price-to-earnings ratio of 11 times and a forward P/E of 9.  In addition, the company has roughly $15 per share in cash.  The stock has performed well recently from a fundamental basis, with revenues during the first three quarters climbing 6% year over year.  China Mobile pays a semi-annual dividend, which amounts to a nearly 4% yield at current prices.

Vodafone (NASDAQ: VOD) is a telecom company based in the United Kingdom.  The company carries a market capitalization north of $130 billion.  Vodafone may be an unfamiliar name to investors in the United States, but America accounts for a major component of Vodafone’s business.  Vodafone owns a 45% stake in Verizon Wireless and receives hefty dividends from this stake.  As a result, Vodafone has traditionally taken this cash and used it to fund dividends to its own shareholders.  Recently, Vodafone announced a share buyback as well.  At current prices, Vodafone’s semi-annual dividend yields more than 5.5%.

France Telecom (NYSE: ORAN) is the smallest company of the three, with a market value of approximately $30 billion.  However, its dividend is anything but small.  At current prices, this stock yields near 14%.  Such a high yield in this stock is the result of both modest dividend growth, as well as a significant collapse in the company’s stock price.  Over the last five years, the world has seen a gradual recovery from the depths of the Great Recession.  Unfortunately for France Telecom’s shareholders, no recovery has occurred in the company’s shares.  The stock price has gradually declined since 2008, from over $35 to its current level near $12.  Despite the dramatic decline, the company has maintained its dividend.  The company advised investors that third-quarter revenue declined more than 3% versus the prior year.

The Bottom Line

For investors looking for yields that beat the yield on the S&P 500 as well as international diversification, these stocks are worthy of further research.  Investors interested in Vodafone or France Telecom would be wise to monitor the European debt crisis closely, as the two companies derive a large percentage of their sales from that continent.  China Mobile, meanwhile, provides investors entry into one of the premier emerging markets.  Each of these three stocks provides investors modest valuations and hefty dividends, and are worthy of additional consideration.


Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends France Telecom (ADR) and Vodafone. The Motley Fool owns shares of China Mobile and France Telecom (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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