The Prudent Speculator focuses on a well-diversified portfolio of high quality, value-oriented stock...
Time for this Telecom Trio?
06/11/2019 5:00 am EST
I monitor a list of reliable dividend stocks; at some point, one of them may be knocked down by a shock that’s likely to be temporary., asserts Jim Powell, editor of Global Changes & Opportunities Report.
This strategy can pay big rewards. If the price plunges, the dividend yield will shoot up automatically. An investor who acts quickly can lock in the higher yield. AT&T (T), for example, was recently yielding 6.29% and higher dividend yields add up over the years.
One caution is in order — a stock’s price drop must be temporary to justify taking advantage of a jump in its dividend yield. The best opportunities occur when the broad market takes a hit, and your stock declines through no fault of its own.
If your stock drops in price because the company ran into serious trouble — as happened with General Electric (GE) — management may be forced to reduce the dividend, as GE did in 2017 and 2018.
That’s not likely to be the case for AT&T. The company’s cash flow is high enough that the dividend should be secure. AT&T remains OK to buy.
There is no more competitive high-value market in the US today than mobile communications. Every company in the industry is scrambling for growth — just look at the billions of dollars they are spending on advertising.
I first recommended AT&T in the December 2018, and I still do. If you own the stock I think you have an excellent stake in the mobile telecom market.
Another company that looks very attractive to me is Verizon Communications (VZ). The company has a different mix of products and services than AT&T — all of which have considerable promise.
They include a growing presence in the fast-growing Internet of Things (IoT) industry that produces “smart” household appliances, door locks, heating & air conditioning systems, baby monitors, home security systems, and other devices with Internet capabilities that owners can control with their mobile phones.
The potential IoT market is huge – and is still largely untapped. The amazing growth of Amazon’s Echo voice assistant is a good indication of how popular IoT is likely to become.
All of Verizon’s wireless services will benefit from the company’s upgrade to the new 5G Ultra Wideband system that will carry more data — and deliver it faster — than the 4G technology that’s the current standard.
Verizon already has 5G in Chicago and Minneapolis — and plans to have it in 20 more cities later this year. 5G will be a game changer for mobile communications, mobile Internet, entertainment, virtual reality, IoT, — and more.
Verizon is also active in wired services including local exchanges, long-distance service, voice messaging, conferencing, customer contact centers, and TV access. Although Verizon’s stock price is volatile, I think it has the best prospects for long-term growth in its industry. A recent price dip pushed the dividend yield up to 4.21%. Patient investors should see excellent returns from Verizon.
In every industry there are usually a few companies that supply the front runners with the equipment and services they require. The companies that operate behind the front lines take few of their customer’s risks.
In the wireless industry, Crown Castle International (CCI) offers a basic service that nearly every provider needs. The company owns over 40,000 cellular towers, 25,000 miles of fiber optic networks, and 50,000 small cellular nodes for cities.
The company leases its towers and other infrastructure to the nation’s leading cellular businesses. Customers provide their own equipment for the towers. Only the tower itself is the responsibility of Crown Castle. It’s a nice business.
Crown Castle has excellent growth prospects. Wireless use is increasing everywhere in the US – which is increasing the need for more towers, fiber networks, and small cells. The company is also getting more business from municipalities that need private networks to serve its 911 call centers, police and fire communications, and so on.
It’s not surprising that net income for Crown Castle during the first quarter of this year was $210 million vs. $114 million last year.
Crown Castle offers investors a lower-risk way to participate in the fast-growing wireless industry that will be expanding and converting to 5G technology over the next few years. I think the stock will be a good long-term performer. Its dividend yield is currently 3.61%.
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