4 Favorite Wireless Stocks That Tower Above the Rest

The Covid-19 pandemic has brought many industries to a halt. Telecom stocks stand out for their resilience; indeed, wireless demand has increased and prospects remain strong for 5G. Here, several MoneyShow.com contributors look at the top wireless carriers and cell tower operators. Tom Hutchinson, Cabot Dividend Investor High-yield stocks offer a nice buffer while we weather the rest of this storm. And I've found two companies that pay high and secure dividends and whose relative value in the market should soar in the months and quarters ahead. Verizon Communications -- with a yield of over 4% -- is the largest U.S. wireless carrier. Of the four major U.S. telecom carriers, it has by far the most wireless revenues with the largest network and coverage. The wireless business (which accounts for about 85% of adjusted earnings), along with its ancillary businesses in TV, internet and enterprise service, is booming during this crisis. Wireless and Internet usage is way up while people are stuck at home. It is one business that is absolutely thriving. Verizon should post very stable and probably better-than-expected earnings right through this economic disaster. The dividend should be secure and downside will be limited. But it is also very well positioned for the post-coronavirus economy and market. Verizon is a leader in 5G and has already rolled it out in 30 cities, putting it ahead of everybody else and first to the party. 5G will be a game-changer that will thrust the country into a new technological age. 5G is also likely to be the biggest story in the market after this crisis abates. Smartphones with 5G are just hitting the market this year, although things could be delayed. New technologies will need a much higher degree of internet connectivity and they will need Verizon, which will charge for the expanded services. Verizon is a great stock to own through the crisis and it also has a strong growth catalyst for the post-coronavirus market. Gordon Pape, Internet Wealth Builder AT&T is a U.S.-based telecom company. It is the second largest provider of mobile services and the largest provider of fixed telephone services in the U.S. It also provides pay-TV services through DirecTV. The recent acquisition of Time Warner (now called WarnerMedia) made AT&T a major content provider as well. The bad news is the company released first-quarter results that came in below expectations for both revenue and profits. The company also withdrew guidance for the rest of the year, citing the lack of visibility relating to the Covid-19 pandemic. The good news is that AT&T expects to provide cash from operations to support investments in growth areas, dividend payments, and debt retirement. First-quarter revenue totaled $42.8 billion versus $44.8 billion in the same period last year. Growth in domestic wireless service revenues and strategic and managed business services revenues partially offset declines in revenues from WarnerMedia, domestic video, legacy wireline services, domestic wireless equipment, and Vrio. (Vrio is the holding company for AT&T's Latin American entertainment operation.) Adjusted earnings per share in the quarter came in at $0.84 compared to $0.86 the year before. The company did not adjust for Covid-19 costs of about $0.05 per share in the quarter, with more than half of those costs expected to have only short-term impacts. The stock pays a quarterly dividend of $0.52 a share ($2.08 a year) to yield 7%. Based on the CEO's comments, the payout looks safe. AT&T looks poised to weather the storm with relatively minimal damage. The company's solidity and the high yield make it a very desirable stock to own at this time. We rate the stock a buy. Brett Owens, Contrarian Outlook Investors looking to deploy cash now should consider two strengths in anything you buy in the coming weeks -- a low beta and a safe and growing dividend. A stock's beta is a handly volatility indicator. Here's how it works: the beta of the S&P 500 is always 1. So a stock with a beta below 1 is less volatile than the market. Betas above 1 are more volatile. Crown Castle International , a cell-tower owner. CCI's beta, measured over the past five years, is 0.28, meaning CCI has been 72% less volatile than the S&P 500. Its low volatility makes sense: the real estate investment trust (REIT) forms a big part of America's communication backbone, with its 40,000 cell towers and 80,000 route miles of fiber-optic cable. REITs have been hammered in this downturn, and the pain got worse on April 1, when millions of people told their landlords they can't pay the rent. CCI doesn't have that problem, with cell service critical in this period of isolation, and among the last things cash-strapped consumers will cut. That means the company's clients, including Big 4 U.S. telcos Verizon, AT&T, Sprint and T-Mobile US , are unlikely to leave CCI holding the bag. Combined, these four supply 74% of CCI's site-rental revenue, a high concentration that actually provides a measure of safety these days. The company also gets revenue certainty from its long-term leases: as of November 2019, CCI had a weighted average remaining lease term of five years. But we're getting off track -- let's move on to my second must have that any stock on your shopping list needs to have today. Of course, a history of dividend growth isn't enough, because as we've seen recently, several companies that have made steady payouts for years have hit the brakes on them, and there are more to come, with Goldman Sachs recently saying it expects dividend payouts to fall 25% this year. For extra insurance, then, we need to look at other factors, including a stock's payout ratio. For a REIT, that means dividing the annualized dividend into the last 12 months of adjusted funds from operations (FFO) -- a better measure of REIT performance than earnings per share. In the case of CCI, we get a payout ratio of 84%, which is plenty safe for a REIT with long-term, predictable revenue streams. Mike Cintolo, Cabot Top Ten Trader With more than 180,000 tower sites across the world, American Tower Corporation will be one of the most important players of the 5G ramp-up. 5G is expected to be a game-changer, exponentially increasing wireless usage as speeds improve and increased connection possibilities allow for new applications, including autonomous vehicles and drones. As for the effect on business, American Tower's CEO recently remarked that 5G will require cell towers be closer together, which will obviously represent a big building opportunity for AMT. Of course, bigger picture, the general rise in mobile device usage is driving growth; American adults spend about three and a half hours daily browsing the internet on their phones, a statistic that is expected to rise to four hours by next year. About 88% of AMT's customer base is the large wireless providers (AT&T, Verizon Wireless, Sprint and T-Mobile), and the recently approved Sprint and T-Mobile merger -- which had stymied mobile tower growth for a while -- is anticipated to supercharge T-Mobile's 5G deployment and position Dish as a possible fourth carrier, which should also boost tower build-outs. The company's growth hit a hiccup in Q4, but funds from operations (the preferred profit measure for REITs like American Tower) are expected to continue their trend of slow, steady reliable growth. The dividend is relatively modest for a REIT (1.7%) but is raised most every quarter. Technically, AMT had a big run from late 2018 ($150 or so) to its peak earlier this year (near $260) before going over the falls with the market, dropping as low as $175. But it immediately spiked about halfway back, and then it motored all the way to new highs on heavy volume! New highs usually bring out the sellers in a down market, so if you're game, aim to grab a few shares on weakness.

4 Favorite Wireless Stocks That Tower Above the Rest

Telecom stocks stand out for their resilience and 5G is also likely to be the biggest story in the market after this crisis abates.

Columnist Conversation

This Weekend on Real Money

Friday Morning Fibocall for 10/22/2021

10-Year Note Yields

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.