7 Top Telecom Stocks to Own for Growth in Wireless, Data and Income

Increased data and wireless usage globally appear to be enduring long-term trends that will stay in place despite general economic challenges. These companies also benefit from wide moats -- due to limited competition in the space. Several top investment experts and contributors to MoneyShow.com look both here and abroad to dial up income and growth potential. Rida Morwa, High Dividend Opportunities In the data-driven world, telecom has become an increasingly essential industry that is impervious to business cycles. Since 2010, there has been a mind-boggling 22,000x increase in the average household data consumption, and this trend is only set to increase. In the U.S., just a few big companies control much of the telecom industry and can charge higher prices for these services. This may be upsetting for a consumer, but it is great for an investor. The big U.S. telecom group is an excellent dividend steward, and we want to collect reliable income from this essential utility of the information age. AT&T Inc. has a fat yield that will help you avoid running out of money in retirement. The nation's 2G and 3G infrastructure are being shut down and upgraded to 4G/5G. This will bring a strong device refresh cycle, boosting wireless adoption. With this, we expect data consumption to climb, providing tailwinds for AT&T's wireless operating margins. During Q3, AT&T's wireless revenue YoY growth was its highest (5.6%) in more than a decade, indicating that the catalysts are in action. Additionally, the company has been working to reduce its operating expenses and is on track to deliver +4 billion out of its run rate target of $6 billion in cost savings by the end of 2022. Prior to the spinoff of Warner Brothers, AT&T was a Dividend Aristocrat providing regular annual dividend hikes. As debt decreases and operating margins improve, long-term investors can expect growing dividends from this telecom giant. Meanwhile, the stock is cheaply valued at a forward P/E of 7.3x, making it a tremendous bargain at current prices. Prakash Kolli, Dividend Power Verizon Communications offers reliable safety and the potential for long-term returns. The combination of undervaluation and high dividend yield make it attractive. The stock price has bounced back a bit in the past few weeks but is still down ~27%. Verizon is significantly undervalued based on historical metrics. Verizon serves roughly 120 million wireless connections, 6.7 million FiOS and other broadband connections, and approximately 25 million fixed-line telecom connections. Total revenue was $133,613 million in 2021, and the last 12 months, making the firm the second largest telecom company in the United States. Verizon is paying a ~6.8% dividend yield, just below the recent peak and nearly the highest in a decade. Verizon reliably increases the dividend by 2% annually. It has done so for 18 years, making the stock a Dividend Contender. Moreover, the dividend safety is conservative, with a payout ratio of approximately 47%, alleviating the fear of a dividend cut. The combination of a bear market and weak retail cellular growth has pressured the stock price while simultaneously increasing the dividend yield and lowering the valuation. Verizon is trading at an earnings multiple of ~7.4X, almost the lowest in the past 10 years. The stock is a good one for investors seeking dividend growth and income. We consider it to be a no brainer dividend stock. (Disclosure: Prakash Kolli is long VZ.) Joseph Bonner, Argus Research We think that T-Mobile remains the best positioned of the national wireless telephone carriers to take market share. Its unlimited-service business model and low-cost operating structure are oriented to appeal to price-sensitive consumers. Management has targeted a 20% market share in wireless business services by 2025 and claims to have the fastest-growing broadband internet service in the U.S. We cannot overstate the strategic importance of T-Mobile's April 2020 Sprint acquisition. In addition to a broad customer base, Sprint supplied T-Mobile with a trove of mid-band spectrum that has allowed it to rapidly build out its next generation 5G mobile wireless network. Although 5G is a small part of the wireless industry, it promises to be the next growth driver for the industry and for T-Mobile in particular. The appeal of T-Mobile's service plan innovations to wireless customers has been amply demonstrated by its robust subscriber addition metrics. While T-Mobile has successfully captured the wireless consumer market, its next assaults will be on wireless business customers, and on residential cable and internet service with its 5G home internet fixed wireless broadband service. Apart from 5G service, T-Mobile is looking to grow by increasing its U.S. small market penetration though a network buildout into rural areas, adding in-home fixed wireless broadband access to its mobile wireless service package. We are maintaining our buy rating on T-Mobile and raising our target price to $175. Bruce Kaser, Cabot Undervalued Stocks Advisor With $120 billion in revenues, Comcast is one of the world's largest media and entertainment companies. The shares have tumbled 50% from their late 2021 peak and now trade in line with their mid-2015 price. Investors worry about cyclical and secular declines in ad revenues, a decline in cable subscriptions, and competitive pressure as phone companies upgrade their fiber networks. However, Comcast is a well-run, solidly profitable company that for decades has successfully fended off intense competition while increasing its revenues and profits. The company's diversified operations have helped provide it with valuable stability. Its slow-and-steady cable business is highly profitable even as it invests in technology upgrades to maintain its edge over competitors. A major appeal of Comcast is that it generates immense free cash flow -- a strength that is likely to endure. This free cash flow is not only plenty to support its reasonable debt level, but also supports a generous dividend and sizable share buybacks. Comcast has repurchased 6% of its shares in the past five quarters. In September, the company doubled its buyback program to $20 billion, strongly suggesting buybacks will continue. Despite its strengths and quality, Comcast shares trade at an overly discounted 6.1x cash operating profits (EBITDA) and 7.9x earnings and offer a 3.4% dividend yield. Investors searching for solid and enduring value at a very fair price need look no further than Comcast. Our price target is $42, based on 6.5x EV/EBITDA using a conservative estimate for 2024 results. Philip MacKellar, Contra the Heard Orange Telecom is a French telecommunications provider and a top pick for income investors in 2023. Its French business is complemented by operations in Spain, Poland, other European countries, and nations throughout the Middle East and Africa. The stock's price fell in 2022; the company was impacted by slowing economic activity in Europe, valuation compression among telecoms, and a strong U.S. dollar which dragged the NYSE-listed ADR (American Depositary Receipt) lower. Despite the lackluster performance, the dividend yield has compensated for the downdraft and the company is well positioned heading into 2023. A dividend increase is not our base case for this stock, but a 7.5% dividend from one of Europe's largest telecommunication providers is nothing to scoff at regardless. In addition to the distribution, it is possible to see capital appreciation in 2023, as the corporation's valuations are currently low and could move higher. Moreover, global equity markets are coming off a bad year, the economic situation in Europe could stabilize, and the euro could continue to rebound versus the U.S. dollar. Orange's outlook is strong, but there are two caveats here for income-oriented investors. First, the distribution is not paid out monthly or even quarterly, which could be an issue for those needing regular payments, and second, there are ADR fees associated with the dividend. These cautions aside, Orange represents an excellent income-oriented opportunity for 2023. Marty Fridson, Fridson/Forbes Income Securities Investor Vodafone Group, Plc is based in the United Kingdom and engaged in telecommunication services throughout Europe and internationally, with mobile operations in 26 countries. Together with its 30 partners, VOD has mobile networks in 46 countries. Back in January 2019, we downgraded our recommendation to Hold. The change was driven by the increased risk of a dividend cut on the heels of the company's $22 billion partial acquisition of Liberty Global . Although VOD did indeed adjust its dividend modestly lower, its dividend now appears stable. Investment grade debt ratings reflect VOD's large size, geographic diversification, and strong market position. The company's successful convergence strategy to expand its fixed broadband assets in Europe has demonstrated operational synergies. VOD reported 1H fiscal 2023 profit for the period ended 09/30/22 of €€986.0 million, essentially flat with the year-earlier comparable period. Adjusted 1H net income for the fiscal 2023 period was €1.689 billion or 6.02 eurocents per share, matching analysts' estimates and up from 4.90 eurocents a year ago. Operating income grew 12% year-over-year to €2.94 billion. Nonetheless, the company slightly lowered its full-year guidance against the backdrop of rising interest rates and inflationary pressures. With this update we are changing our recommendation to Buy; our fair value price is $18.50. Ben Reynolds, Sure Passive Income Since its founding in 1995, American Tower has become a worldwide leader in communications real estate properties. American Tower has approximately 233,000 communications sites. Among these, more than 43,000 are located in the U.S. and Canada, with the remaining properties in international markets. The REIT is valued at just over $100 billion. American Tower has put together an exceptional record in the last decade, with many of the same tailwinds present today. The REIT is the clear leader in the U.S. market and has a substantial footprint around the world. The early innings of 5G have just begun and the major carriers are aggressively working towards developing networks capable of having the service reach more customers. This was seen in the most recent quarterly report where property revenue ran ahead of total revenue for American Tower. The company also signs long-term leases with its customers, locking in future revenue streams for long periods of time. Shares of American Tower yield 2.6%, which is much lower than the typical REIT. However, the expected payout ratio for 2022 is just 56%, also extremely low for a security in this sector. As such, the 10-year dividend growth streak seems very likely to continue. Growth has been impressive over the last decade, with American Tower's AFFO growing at a compound annual growth rate of 12.6% over the last decade. That said, given the size of the REIT, we project AFFO growth of 6% annually through 2027.

7 Top Telecom Stocks to Own for Growth in Wireless, Data and Income

Investment experts say look both here and abroad to dial up potential in the space.

Columnist Conversation

AAP Podcast: This Company Is Not Going 'Solo'

This Weekend on Real Money

AAP Podcast: A Tongue -- and a Market -- Twister: 'Get a Debt Deal Done'

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.