Verizon Communications (VZ)

He has chosen to get his exposure to the telecoms through the Canadian names, primarily because there is a lot less competition. Verizon has done a good job of growing the percentage of their revenues that come from wireless. A few years ago it was close to 60% and is now at 70%. Also, they acquired the remaining 45% from Vodafone (VOD-Q) which makes them very wireless heavy moving forward. With the increased sales of smart phones and the 4G technology, the average revenue per unit is going up because of the increased subscription to data. All of these are positive. Great dividend of about 4.5%. Stock is cheap trading at 10 or 11 times earnings. On paper it looks perfect, but the one challenge for them is that it is a very competitive space. There is constant cost-cutting to compete with one another.

Seasonality is usually the best between May and October of each year. Technically it is not so good. Has been in a trading range, and is now getting close to the bottom of it. It will be reporting lower earnings for the 4^th quarter. There are better opportunities elsewhere.

Telecom has been acting a little better recently. Interest rates will stay lower longer than people think. But VZ-N is not going to be one of the winners. Prefers T-T, which he owns.

This is a company that interests him somewhat. Likes that they bought out Vodafone’s portion of the wireless business. It was $130 billion acquisition, and immediately accretive. Not an expensive stock and pays a very fine dividend. (N.B. Dividends from US corporations are treated something like interest income and are fully taxable.) The most recent news was kind of disturbing in that they were having margin problems and troubles from a competitive standpoint in maintaining their pricing model.

Had really great growth over the last couple of years, on the back of being a leader on the 4G LT network. When there is a lot of capital in the market, it makes people do some not so responsible things, and that has been a concern giving a lot of pricing pressure. She has been buying into that weakness and concern. Sees the dividend as being sustainable. This company has always been ahead of the curve in building out their network or products. A stable dividend of 4.5%.

The seasonals for the telecom industry are actually quite strong through to the end of the year, approximately the same time as the technology sector. The problem is, they don’t tend to outperform the market. It is more of a defensive play. This one hasn’t really shown those positive seasonal tendencies that you want to see. In the month of December, it has formed a lower high. Support would be at about $47.50.

This is one that he is always looking at. Very attractively priced. Big fat dividend. His problem is that he can find better value and cheaper in Canada. He doesn’t have to worry about the currency, and he gets to keep most of his dividends. Doesn’t see this as being much more attractive compared to the Canadian names. His favourite is Rogers (RCI.B-T), which is starting to perk up a little bit. With Rogers you get better assets with a cheaper valuation.

Verizon (VZ-N) or AT&T (T-N)? Verizon dividend yield is 4.25% versus AT&T's 5%. He wants to own dividend stocks that are growing their cash flow, but they don't have to be high dividend paying stocks. Wants to know that that dividend is going to increase. Feels this is a good, safe way to play certain trends going on in the US in the telcos. Also, you are clipping a very attractive yield. Both stocks are good, but focusing on growth opportunities, he feels this one has the best opportunity.

Provides a pretty attractive yield. Of all the US telcos, this would be the one she would buy if she wanted to be in this space. She has tended to stay in Canada for yield. Trading at a reasonable multiple and have a bit more growth on the wireless side.

Verizon (VZ-N) or Vodafone (VOD-Q)? If he had to choose, this would be the one he would pick. They took out the minority interest in Vodafone in the US wireless business. This gives you a little bit of opportunity from a growth standpoint, because of their large embedded infrastructure in the wireless area. They also pay out a very fine dividend and are investor friendly. Dividend is very safe.

Took a hit in the correction, but he thinks it is well positioned as a content provider. He likes this one. It is a value stock with a low PE, share buybacks, nice dividend and the ability to raise it. He prefers it to others in Canada with the dividend tax credit because the metrics of the earnings are that much better.

If you believe that we are in for more rocky markets to come, you want to be in the telcos. They have the annuity style revenues, and this one is a triple play selling wireless, cable and a bunch of other different products. He likes this, but prefers Canadian ones even more because you don’t have to pay withholding tax on dividends and worry about currency. Don’t think you can go wrong if you buy this.

4.5% yield. There is no government of Canada impact like the Canadian telecoms. A trend in the US is for towers to be purchased from the providers. That would be $6 billion for VZ-N. They actually have subscriber growth.

His overall view on telecoms is that it is probably something you should lighten up on. Most of them don’t have a lot of upside.

Telcos going forward are pretty fully valued at this point. This is trading at 2X PEG ratio and 13-14 times forward earnings. That is pretty rich, but you are getting a pretty decent dividend yield of 4.5%. The dividend will probably grind higher over time.