If 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)
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 growth..so 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.
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:
-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….
TickerNamePriceDividend YieldPayout Ratio VODVodafone Group PLC29.83.4196.98 CHTChunghwa Telecom Co Ltd31.764.5293.31 HTCOHickoryTech Corp10.445.5491.83 MBTMobile Telesystems OJSC19.533.7973.88 LMOSLumos Networks Corp13.514.1871.83 VIVTelefonica Brasil SA26.375.0270.7 KTKT Corp16.184.2667.76 BCEBCE Inc45.944.9465.51 VIPVimpelCom Ltd12.234.761.59 USMOUSA Mobility Inc12.923.8860.94 TUTELUS Corp35.253.5360.35 NULMNew ULM Telecom Inc6.055.4753.25 SKMSK Telecom Co Ltd18.926.6652.72 DCMNTT DOCOMO Inc15.734.350.06 RCIRogers Communications Inc49.023.4747.35 CHLChina Mobile Ltd53.173.8843.18 NTTNippon Telegraph & Telephone Corp24.553.6536.63 PTNRPartner Communications Co Ltd6.811.4833.47 TEOTelecom Argentina SA16.295.4630.06
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 growth..so 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:
TickerRCIHTCO NameRogers Communications IncHickoryTech Corp Current Dividend Yield3.465.56 5 year Dividend Growth21.413.5 1 year Dividend Growth10.243.64 Sales Growth (1 year)1.1312.02 Sales Growth (5 year)3.044.33 EPS growth (5 year)5.9414.35 P/E ratioN/A16.87 P/E Next Year13.612.58 Margins growth-20.62-0.86 Payout ratio47.3591.83 Return on Equity45.3518.25 Debt to Capital RatioN/A1.02 Price49.0210.44 Trading Volume385182.843820179.23242
