3 Telecommunication Stocks for the Income Investor
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As checking, savings, CDs, and bonds continue to yield paltry amounts, savers are stuck with very few options in order to get any decent income. However, I believe these three telecommunication stocks offer not only great income through dividends, but capital appreciation over the long term.
Verizon Communications (NYSE: VZ) is simply a telecommunications behemoth. With approximately $110 billion in revenue and $7 billion in net income, VZ is among the largest firms in the world. Moreover, its wireless unit, which is 45% owned by British giant Vodafone Group (NASDAQ: VOD), is the #1 phone operator in the United States and immensely profitable. VZ trades at a reasonable 15x trailing and forward P/E, 1x P/S, paltry 3.8x EV/EBITDA, and consistently growing 5.2% dividend yield. VZ is a nice buy.
AT&T (NYSE: T) is a telecommunications giant as well with an even greater $125 billion in revenue and almost $12 billion in net income this past year. The company is the second largest wireless operator in the United States, well ahead of third place Sprint (NYSE: S), and is trading at favorable valuations. At a 15x trailing and 12x forward P/E, 1.4x P/S, 6x EV/EBITDA, and consistently growing 5.9% dividend yield, AT&T is a nice buy. Moreover, with the uncertainty regarding the T-Mobile purchase out of the way, AT&T looks even more attractive.
CenturyLink (NYSE: CTL) is much less well-known than the previously two names, but is no slouch itself with more than $12 billion in revenue and almost $700 million in net income this past year. CTL is a little pricier at a 24x trailing P/E and 1.8x P/S, but also looks very nice at a 14x forward P/E, 1x P/B, and very nice 7.9% consistent dividend yield.
Also, Frontier Communications (NASDAQ: FTR) is another high-yielding telecommunications stock trading at just 1x P/S and P/B, just over 5x EV/EBITDA, and a consistent dividend right near 15%. But it's more for the aggressive investor because its revenue base is not as stable as the others.
I believe splitting a position between the Verizon, AT&T, and CenturyLink will generate a very nice average 6.3% dividend yield and pleasant capital appreciation over the long-term.
The Motley Fool has no positions in the stocks mentioned above. Wiseinvestors is currently long Frontier Communications. 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.