Telecommunications Ideas

[EricL]

The ninth installment of my "Blue Light Specials" series was posted this morning on Seeking Alpha. This is the first sector that I wasn't able to find 5 stocks to make the cut, but considering there are only 9 stocks from the sector on David Fish's "CCC" List, I think the options are pretty decent.

Blue Light Specials In The Market: Telecommunications

While I don't own any of the stocks currently, I can see myself buying either Verizon or AT&T in the future. While neither have very high growth rates, the yields are attractive and both are stable long term companies, perfect for long-term compounding of reinvested dividends.

[Jason]

What do you think about At&t purchasing Direct tv.? A couple of analysis that I was listening to this morning suggested that it was a cash flow move to cover the dividend.

[EricL]

(05-13-2014, 09:59 AM)Jason Wrote: What do you think about At&t purchasing Direct tv.? A couple of analysis that I was listening to this morning suggested that it was a cash flow move to cover the dividend.

I am not terribly familiar with either stock but I think that line of thinking does have some merit. DTV is fairly cheap considering its growth rate as it trades at just 13x forward earnings, and according to FAST Graphs trades at just 7.4x free cash flow.

I think if the takeover is financed mostly with cheap debt rather than shares it would make sense for AT&T. The company has an A- credit rating and should be able to get long term debt for less than the 5% dividend payout on its own shares.

I suppose the deal makes sense as it would provide AT&T with a new customer base and a large presence in Latin America. At first glance, and with my very limited research, it makes sense to me if done at the right price and with the right financing.

[Jason]

(05-13-2014, 10:15 AM)EricL Wrote:

(05-13-2014, 09:59 AM)Jason Wrote: What do you think about At&t purchasing Direct tv.? A couple of analysis that I was listening to this morning suggested that it was a cash flow move to cover the dividend.

I am not terribly familiar with either stock but I think that line of thinking does have some merit. DTV is fairly cheap considering its growth rate as it trades at just 13x forward earnings, and according to FAST Graphs trades at just 7.4x free cash flow.

I think if the takeover is financed mostly with cheap debt rather than shares it would make sense for AT&T. The company has an A- credit rating and should be able to get long term debt for less than the 5% dividend payout on its own shares.

I suppose the deal makes sense as it would provide AT&T with a new customer base and a large presence in Latin America. At first glance, and with my very limited research, it makes sense to me if done at the right price and with the right financing.

I think you are right about Latin America.They may be looking to diversify outside the US.

[ChadR]

Looking like they might try to do the deal with mostly stock. Which I don't like since I am a current T shareholder. Like the deal, just don't like it if the rumors are true and they use mainly stock.

Personally like the deal since I have DirecTV and with the deal, we should be able to get internet from them too. Really hate Charter as our internet provider, but it's our only option right now.

[cannew]

Good article! Surprised you did not mention or include Telus. It's dividend record matches BCE and they have had double digit DG for the past 4 yrs (split stock in April). I own BCE & Telus in Canada.

[EricL]

(05-13-2014, 11:01 AM)cannew Wrote: Good article! Surprised you did not mention or include Telus. It's dividend record matches BCE and they have had double digit DG for the past 4 yrs (split stock in April). I own BCE & Telus in Canada.

Telus does look like an interesting option, thanks for bringing it to my attention. I was focused on selecting companies from the CCC List and did not notice Telus on the "near challengers" section.

The company has a pretty short track record, but what I see so far looks good. The yield is a bit lower than the others at 3.8% but with an expected growth rate of 8-9% it looks to be a bit faster grower.