Although telecom stocks don’t always make the headlines in today’s market, it’s important to recognize the value in buying companies that offer decent growth potential combined with relatively stable and consistent earnings. Telecom companies help to keep the world connected by allowing us to conveniently communicate on their large networks. Just imagine how life during the global health crisis would be without the connectivity that we have grown so accustomed to.
The telecom sector is constantly evolving thanks to new technological advances and changes to how we live our day-to-day lives. With the vast rollout of 5G on the horizon, a steady shift to people working from home, and internet use at all-time highs, telecom companies could be poised for a strong 2021 and beyond. Even though many of these companies have had to deal with short-term issues caused by the pandemic, there’s a lot for investors to like about the companies that are keeping the world connected.
Here are 3 telecom stocks that stand out at this time:
Charter Communications
The telecom sector is highly competitive, which is why investors should look to companies with the scale to keep up and adapt to the changes that continuously occur in the industry. That’s why adding shares of the second-largest US cable company Charter Communications (NASDAQ:CHTR) makes a lot of sense. Since Charter has upgraded its network and offers higher quality internet access than major competitors, it has been able to gain market share throughout the pandemic. With people working from home and using the internet more than ever, investors can expect Charter to continue delivering strong earnings next year and beyond.
The stock is up over 34% year-to-date and the company had a convincing third quarter. Charter reported Q3 revenue of $12 billion, up 5.1% year-over-year. The company’s 91.8% year-over-year mobile revenue growth in the quarter was impressive and the 13.6% year-over-year EBITDA growth is a testament to just how strong the company’s management team is. It’s one of the best telecom stocks to own thanks to its massive scale, strong free cash flow generation, and share buyback program that boosts the company’s EPS.
AT&T
Investors that are interested in a diversified telecom company with a long history of increasing its dividends over the years should take a look at AT&T (NYSE:T). It’s a leading provider of communications and digital entertainment services in the US and could be in store for a strong 2021. AT&T has dealt with its fair share of COVID-19-related headwinds this year, including sales declines in the WarnerMedia segment. However, it’s hard to deny that the company is playing a key role in keeping the world connected during such a challenging time. The AT&T Global Network’s average daily data traffic is up nearly 20% from pre-pandemic features. Subscriber growth is climbing for the telecom giant and in Q3 the company reported 5.5 million net adds.
AT&T’s earnings should benefit from the 5G rollout next year via increased wireless sales. The company is also seeing strong growth with its streaming platform HBO Max, with HBO Max activations more than doubling from second-quarter levels. There’s also a big reason why stocks like AT&T are a favorite for retirees and investors that are seeking dividend income. With a dividend yield of 6.76% and the fact that the company is one of the esteemed dividend aristocrats, this telecom stock is a solid option for any portfolio.
Vodafone
Finally, we have a telecom stock that offers investors exposure to countries outside of the United States. Vodafone (LON:VOD) (NASDAQ:VOD) is the leading global provider of international wireless telecommunication services including services like voice, data, messaging, fixed broadband, and television. This is a massive telecom company, with roughly 270 million wireless customers globally and mobile networks in 24 total countries. Vodafone has operations in Europe, Africa, the Middle East, and Asia Pacific, although 77% of its FY 20 service revenues came from Europe. Investors that are interested in a telecom stock that offers exposure to a few different emerging markets that could provide strong growth going forward should take a look at Vodafone.
Vodafone’s large global scale allows the company to source equipment at lower prices and benefit from being one of the best quality providers in most of the markets it operates in. The company has been dealing with the negative impacts of the pandemic well and has delivered five consecutive years of margin expansion. The stock offers investors a dividend yield of 8.76% and is likely a bargain at its current price.
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