The telecom sector dates back to the 1830s with the introduction of the telegraph system and saw further development when the Bell Telephone Company hit the scene in 1877. Since taking these initial steps toward speeding up global communication, the industry has continued to evolve and change — for example, its transition from telegrams to landlines, smartphones, and the internet. Wireless networks like 5G and other newer technologies will usher in further advances.
You can divide the telecom sector into three major groups: wireless communications, telecom service providers, and telecommunication equipment. The equipment group is the largest in the telecom sector while wireless communications is the fastest growing one.
What Are Telecom Stocks?
As telecommunications companies expand with the increasing demand for improved communication and data exchange, they issue telecom stocks to raise funds for further business growth. Investing in telecom stocks has become an appealing prospect for investors as it entitles them to a slice of the company earnings proportionate with their investment. Whether you are looking for an income-oriented investment or a growth-oriented one, the relative stability of the telecoms sector promises good returns.
Telecom stocks offer a mix of growth and income to investors. Some, like Verizon and AT&T, are considered blue-chip stocks and are highly sought out by “buy and hold investors.”
That said, here are some of the most important players in the space.
Best Telecom Stocks: Wireless Communications
Verizon Communications Inc. (NYSE: VZ)
Verizon Communications Inc. is a member of the Dow and the S&P 500. The company is predominantly in the data services business. Over the last few years, the popularity of smartphones has been a critical driver for its growth.
One of its strengths is size. Unlike other industries, the barriers to entry are very high in telecom. In other words, it will be tough to knock Verizon off the block.
There is a consistent demand for Verizon’s products and services. Data connection has become a crucial part of everyone’s daily routine. While the styles and the models of the phones change, people will continue to subscribe to data plans for their devices.
Need a reason to buy the stock?
Verizon is a dividend stud. It pays its investors an annual dividend of $2.41 per share.
China Mobile Ltd. (NYSE: CHL)
China Mobile Ltd is a Chinese telecom company that specializes in mobile services, IoT, data services, voice services, and multimedia message services. The company has been able to grow its market cap to the 100+ billion club because of China’s strong demand for internet and mobile phones.
In fact, it has more than 900 million mobile customers, making it the world’s largest mobile phone operator by that metric. China Mobile reported a net profit of $9.62 billion between January 2018 and June 2018 and its operating revenue rose by 2.9% a year earlier.
Despite all the achievements, the company remains forward-looking. It plans on making 5G technology part of its core growth strategy.
This telecom stock gives investors a chance to gain exposure to the Asian telecom scene. Also, it does pay its investors an annual dividend of $2.17.
AT&T Inc. (NYSE: T)
AT&T Inc. is the world’s largest telecom company, and it is the second-largest provider of mobile telephone services. It’s the largest provider of fixed telephone services in the U.S.
The company was ranked as the world’s most significant media and entertainment company by revenue, in 2018. That’s due to its 2018 acquisition of Time Warner. Whether the mega-merger creates synergy and strengthens the company is yet to be determined.
However, there are plenty of reasons to be optimistic about AT&T if you’re a shareholder, as the company is set to make a push toward 5G technology.
Vodafone Group PLC (NASDAQ: VOD)
Vodafone Group PLC is a telecommunications firm headquartered in Europe, but it has a substantial presence across the globe. It employs people from Europe, Africa, the Middle East, and the Asia Pacific.
Vodafone has over 500 million mobile customers and 20 million fixed broadband customers.
One of the company’s claims to fame is making the first-ever mobile call in the UK, back on Jan. 1, 1985.
At its current share price, Vodafone offers investors an attractive annual dividend yield of $1.09 a share.
Top Telecom Stocks: Telecoms Services
TELUS Corporation (NYSE: TU)
TELUS Corporation incorporated in 1998, but is no slouch in the telecom space. Telus is one of the three biggest telecom service providers in Canada. The company has 13 million subscriber connections. Telus also has 8.9 million wireless subscribers.
It provides telecom services and products such as data, voice, and wireless services. Some of its data services include hosting, television, internet protocol, and cloud-based services.
This telecom stock has some of the best customer service in the business. The Commissioner for Complaints for Telecom-Television Services awarded Telus as the industry leader in customer service for the 2017-18 campaign.
Telus is a dividend-paying stock. It pays its investors $1.60 per share, annually.
The Telecom Disruptor
Netflix, Inc. (NASDAQ: NFLX)
Netflix, Inc offers a video streaming service and is slowly becoming a household name across the globe. It’s also beginning to make waves for its media and entertainment business. In 2018, it won 23 Emmy Awards.
Of course, Netflix is not a core telecom player, but it has already disrupted the space. AT&T and Verizon are all competitors when it comes to cable and television.
That said, Netflix closed the 4Q of 2018 with more than 139 million paying customers across the globe. It was the best performing FANG in 2018, returning nearly 40% on the year.
Ideas on Investing in Telecom Stocks
With unprecedented growth expected around the corner for the wireless telecom markets, you may want to research the top telecom stocks for their investment potential. First, check the balance sheets of the telecom companies to examine their capital structure and get an understanding of their long-term financial viability. You also need to find out what their dividend policies are.
Other aspects to check out include network coverage and its quality, the average revenue per user, how that affects company growth strategies, and how strong the subscriber base is.
Analyzing telecom stocks can be complicated, but it is a necessary step to prevent expensive investment mistakes.
Ideas on How To Trade Telecom Stocks
Traders looking for the best bang for their buck may want to consider trading telecom stock options. Why? Well, these stocks aren’t very volatile, so there are many stock trading strategies that you can use.
For example, if you are bullish, buying call options is a sound bet. However, since these stocks don’t move that much, you may even want to sell cash-secured puts. Now, when it comes to hedging, you can usually get away with buying puts. But doing a bull collar is also an interesting strategy. If you need to brush up on your options skills, make sure to get your free copy of the Options Profit Accelerator.
Most telecom stocks don’t offer explosive growth prospects. However, many of the top names in the space do pay attractive dividends. If you’re interested in investing in telecom stocks or in trading these stocks, consider options to get more bang for your buck.
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