We've Got This Dividend Stock on Our Radar

We are approaching the latest tipping point in mobile technology with the pending launch of 5G networks around the globe. Similar to other mobile technology deployments, such as 3G and 4G LTE, it will be a phased deployment with the U.S. being one of the earlier markets and recent comments from mobile infrastructure company Ericsson confirmed the expected pick up in 5G activity in the second half of this year. And as those new networks from the likes of AT&T and Verizon are built out, we'll also see incremental capacity additions for existing networks. Lending a helping hand has been the current pandemic, which has goosed broadband demand given the surge in work as well as learn from home and increased digital content consumption. According to Sandy Motley, Nokia's president of Fixed Networks, Many customers had planned to grow their network by 30% to 40% over the next few years assuming a similar growth in traffic, but Covid-19 brought in that traffic growth overnight. Clearly there will be some capacity catch up demands that will drive network equipment and testing needs. Here's the thing with 5G, its 5G signals run over new radio frequencies, which means that cell tower equipment needs to be upgraded. To understand the various flavors of 5G, it is important to understand a little bit about radio waves. All radio waves travel at the speed of light, but not all react with the environment in the same way. It is the wavelength of a frequency that directly impacts the speed and the distance of its transmission. Wavelength is inversely proportional to frequency, which means the higher the frequency, the shorter the wavelength. When a wavelength is really short, such as at the higher end of the frequency spectrum, the waveform is so tiny that it can be easily distorted -- not good for sending data. Bandwidth refers to the difference between the highest and the lowest frequency of a signal. The higher you go up the radio spectrum frequency, the greater the range of frequencies, which means bigger bandwidth so faster download speeds, but higher bands are also absorbed more easily by gases in the air, trees, cars, and buildings. Higher bands are useful in densely packed networks, such as a bunch of fans in a sports stadium, but aren't good for carrying data long distance as they are likely to run into something that blocks the signal. What this means is that there isn't just one type of 5G network, but rather there are three main types, depending on the frequency bands the wireless carrier uses. Low- frequency bandwidth networks are able to cover large areas, making them useful in rural communities. But to do so, they have to compromise on speed, making them only about 20% faster than 4G. On the other end of the spectrum, high-frequency bandwidth provides blazing fast speeds, but low coverage area, so those work well in densely populated urban settings. The third version uses mid-range frequencies that offer a better balance between speed and coverage. These 5G antenna setups that will be able to handle more users and more data but beam out over shorter distances means we will need more of them. Greater demand for the antenna and network testing equipment means hunting for companies that fit that bill, and so much the better if it has an enviable dividend yield. That brings us to PC-Tel , which at its core is an engineering and research and development company that designs and manufactures precision antennas and provides test and measurement products that improve the performance of wireless networks. As one can imagine, the launching of a new network technology as well as the need to add incremental capacity to existing networks calls drives demand for antennas and testing. In terms of its addressable market, PC Tel's antennas are deployed in small cells, enterprise Wi-Fi access points, fleet management and transit systems, and in network equipment and devices for the Industrial Internet of Things. The company breaks its business into three addressable markets. Given the favorable demand profile as 5G takes hold, PC-Tel's management sees its revenue reaching $110 million to $130 million in 2022, up from $90.6 million in 2019. PC-Tel also pays a quarterly dividend of $0.55 per share, something it has been doing since mid-2017 and its been a dividend payer since 2011. Given the dynamics of the business as well as the $38.3 million in cash on its books exiting the March quarter, the company has ample firepower to continue paying its current dividend to shareholders, and maybe even give it a little boost. At the current share price, that dividend offers a yield of 3.6%, which is well above the S&P 500 dividend yield of roughly 1.93%.

We've Got This Dividend Stock on Our Radar

PC-Tel should profit from the 5G rollout.

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