The Best Telecom Stocks 2017 Are Overlooked
Tech investors have short memories. By which I mean they are obsessed with the latest trend, the hottest company, the easy money. Very few invest in telecom stocks with high dividends, despite the fact that income stocks are a proven pathway to financial freedom.
Consider this: the best telecom stocks in 2017 pay their shareholders every three months! Once you sprinkle in the magic of compounding values, it’s easy to live a millionaire’s retirement by investing in telecommunications sector stocks. However, most investors will still ignore this.
I have a theory. It’s because telecom stocks aren’t new. They’re not flashy.
As someone who works in the media, I can tell you that my profession is obsessed with “newness.” We all want to find a hot stock that no one else has heard about. Many unscrupulous analysts even push stocks they know nothing about!
The incentives are all wrong. Investors are looking for money-making ventures, but analysts are hawking companies that don’t make profits. None of it makes sense.
So let’s step out of the bubble for a minute.
Let the Silicon Valley hype-machine fade into the background, and listen…
Listen for the sounds of real business.
Unlike so many digital technology companies coming out of the Bay Area, U.S. telecom stocks give customers a real service in exchange for real money. They aren’t “pre-revenue” or valued at “a thousand times earnings.” These are making real money, not just raising cash to burn later.
How to Invest in Telecom Stocks with High Dividends
Anyone can invest in telecommunications sector stocks, from big hedge funds on down to the lonely retail investors. They are available for purchase through any broker or electronic trading platform. But you should be aware that telecom stocks come in two different flavors.
1. Forever Telecom Stocks
“Forever Telecom Stocks” are able to deliver returns from now until…well, forever. Huge amounts of money flow through them, straight into shareholders’ hands. Just from a handful of these stocks, you can potentially earn enough monthly income to kick back and enjoy retirement.
(Hence the name Forever Telecom Stocks.)
Try to look for them in highly concentrated industries, because that is where Silicon Valley has trouble. Even the hottest new startup can struggle in areas like telecom; there is simply too much market power, regulation, and historical path dependence at work.
This tilt toward the status quo is great for telecommunications sector stocks. Since they are the definition of status quo, it’s easy to imagine them flourishing over the next decade or two.
But these Forever Telecom Stocks operate on a national scale. Their roots run deep in American society, which is to say they likely offer services in more than 40 states. It’ll be super-hard for anyone to loosen their grip on telecommunications in the U.S.
2. Growth Telecom Stocks
On the other hand, there are smaller, regional telecommunications sector stocks that offer both high growth and high dividends. These rare beasts are called “Growth Telecom Stocks.”
Now let’s be clear about this. There are some downsides to Growth Telecom Stocks—don’t be surprised to see a telecom stock price fluctuate wildly in the short term. Greater rewards come with greater risks, so you have to ride that roller coaster in order to win big.
List of the Best Telecom Stocks 2017
Here is my list of the top five U.S. telecom stocks of this year. Note that these are not recommendations, just stocks for you to research further.
1. AT&T Inc.
Can you imagine AT&T Inc. (NYSE:T) going out of business? Neither can I.
This company has been paying dividends for decades and decades. In fact, AT&T managed to increase its dividend every single year for the last 31 years! Ronald Reagan was president at the time, just to put the time scale in perspective.
That’s how long this stock has returned money to investors.
Forever or Growth
2. Verizon Communications Inc.
Verizon Communications Inc. (NYSE:VZ) is one of the best telecom stocks in 2017 because it captures 35% of the market. Talk about being a heavyweight. With that much influence on the industry, it’s no wonder that Verizon pays out a hefty 4.75% dividend.
The telecom giant has raised its quarterly dividend every year for the last decade. It’s payout history is long and storied. Before the merger between Bell Atlantic and GTE, which is how VZ stock came into its current form, the company paid out dividends for 33 straight years.
No wonder it’s on my telecommunications sector stocks list.
|Forever or Growth||Forever|
3. Centurylink Inc
Centurylink Inc (NYSE:CTL) is a lesser-known quantity than Verizon or AT&T, but that’s why it offers greater upside. The stock is trading so, so cheap. Investors have a unique opportunity to make money on this telecom stock because of its huge growth potential and massive dividend.
Those two don’t often go hand in hand!
Centurylink’s business of providing communications services and hardware is on the mend, meaning that we could see the share price surge. It’s not unreasonable to expect triple-digit gains from this stock, particularly since other telecom stocks have seen similar advances.
Moreover, the prospect of further consolidation in the telecom arena could act as a catalyst for CTL stock, igniting a bullish rally in the share price.
|Forever or Growth||Growth|
4. Frontier Communications Corp
Frontier Communications Corp (NASDAQ:FTR) is another telecom stock with growth potential. It’s been on a roller coaster ride in recent years, with enough twists and turns to give you whiplash. But that actually makes Frontier an amazing investment opportunity.
When a stock is trading low in a highly concentrated industry, the sharks start to circle—I wouldn’t be surprised if another telecom company buys out FTR stock at a premium! But, in the meantime, investors are able to take home a whopping 20% dividend.
It’s unlikely that this dividend is sustainable over a longer period of time, especially because the company is piling up debt to finance a lot of its obligations. Nonetheless, it’s hard to ignore FTR stock when you price in the possibility of concentration and a 20% yield.
|FRONTIER COMMUNICATIONS STATISTICS|
|Forever or Growth||Growth|
5. Consolidated Communications Holdings Inc
Consolidated Communications Holdings Inc (NASDAQ:CNSL) is a much smaller player than Verizon and AT&T, so it tries to find an edge by carefully choosing places to do business. The company is structured as a holding group, with operations in California, Illinois, Iowa, Kansas, Minnesota, Missouri, North Dakota, Pennsylvania, South Dakota, Texas, and Wisconsin.
While CNSL stock is much safer than Frontier, it isn’t settled enough to be declared a Forever Stock. Rather, it made our list of best telecom stocks in 2017 because of its juicy dividend.
The stats speak for themselves.
|CONSOLIDATED COMMUNICATIONS STATISTICS|
|Forever or Growth||Growth|
Should You Invest in Telecom Stocks in 2017?
As always, dear reader, the ultimate decision is in your hands. That being said, there is strong evidence that income investing can set up a millionaire’s retirement without much stress.
Unlike the folks who trade on a daily, hourly, or even minute-to-minute basis, income stocks are bought and held for a long time. Obviously, Forever Telecom Stocks fit this description, because they are invulnerable to the shifting sands of commerce.
A quick way to tell “Forever” and “Growth” telecom stocks apart is by looking at which exchange they trade on.
Forever Telecom Stocks are listed on the New York Stock Exchange (NYSE) rather than the NASDAQ, because they’ve existed for a substantially longer period of time. To some investors, this solidifies the perception that telecom stocks aren’t really “technology investments.”
Never mind that those same telecom companies helped build the physical infrastructure of the internet, that they deliver internet to our homes, or that they are the cornerstone of the digital age.
Like I said earlier, investors have short memories.
They forget that everything digital is built on something physical. Facebook Inc (NASDAQ:FB) and Google—owned by Alphabet Inc (NASDAQ:GOOG)—might not have existed without telecom companies, much less thrive and become the giants they are today.
It doesn’t matter that U.S. telecom stocks originated in the era of telephones; they’ve also played a crucial role in Internet distribution.
Some will continue building tomorrow, thus leading to expansive growth opportunities, while others will funnel tons of cash back to investors. The important thing for investors to realize is that telecom stocks with high dividends can fit into a tech portfolio; there’s no law against it.