Growth on the Line: 7 Telecom Stock Titans Ring Up Robust Returns
Although the present market uncertainty has many investors jittery, telecom stocks to buy just might symbolize a bright spot. Fundamentally, it all comes down to the critical nature of the telecommunications sector. You just can’t live without it.
To be fair, should a severe downturn materialize, likely all market segments will initially suffer. Just to be blunt, I don’t expect telecom stocks to buy to be issued an exemption. That said, over the long run, these communications stalwarts should be relatively resilient. You can live without certain products or services from other industries. However, telecom is too deeply ingrained in modern societies to ignore.
Another factor that bolsters the case for telecom stocks to buy is that companies in this space tend to offer passive income. Not only that, their rewards tend to be more generous than other sectors. Combined with growth opportunities in digital services and the ongoing 5G global rollout, the ecosystem deserves at least some consideration.
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With that in mind, below are the top telecom stocks to buy to navigate current uncertainties.
Telecom Stocks to Buy: Comcast (CMCSA)
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One of the largest U.S. multinational telecommunications and media conglomerates, Comcast (NASDAQ:CMCSA) is a mainstay for investors seeking the comfort of essential service providers. One of the top broadcasting and cable television companies, Comcast also stands as the largest home internet service provider in the U.S. Since the January opener, CMCSA gained over 22% of equity value.
For full disclosure, CMCSA has been a bit squirrely in recent sessions. For example, in the trailing one-month period, it gave up more than 2%. However, the red ink may also be a blessing in disguise. Right now, the market prices shares at a forward earnings multiple of 10.3X, noticeably lower than the sector median stat of 12.81x.
As for passive income, Comcast isn’t exactly the most generous entity with a forward yield of 2.67%. Nevertheless, the payout ratio sits at 27.42%, allowing stakeholders to sleep easy regarding yield sustainability. Finally, analysts rate shares a moderate buy with a $50.12 price target, implying over 15% upside potential.
Orange (ORAN)
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Formerly known as France Telecom, Orange (NYSE:ORAN) is a French multinational telecom. Per its public profile, the company commands 266 million customers worldwide. It also employs some 89,000 people in its home nation. While not the most exciting enterprise available, ORAN makes an intriguing case for telecom stocks to buy. Since the January opener, shares gained almost 15%.
Moreover, in the trailing one-year period, ORAN returned stakeholders nearly 27%. Generally, what investors appreciate about Orange is its consistent profitability, posting net income over at least the past ten years. Also, it features a strong cash-to-debt ratio of 1.47x, above 73.18% of its peers. Enticingly, ORAN trades at a forward multiple of 9.61x, favorably lower than 71.56% of the competition.
For passive income, Orange offers a high forward yield of 7.4% (though it’s paid semiannually). And while the payout ratio is somewhat lofty at 67.07%, it’s not outrageous for what you get. Lastly, Bank of America pegs ORAN a buy with a $13.65 target, implying nearly 18% growth.
Telecom Stocks to Buy: Telefonica Brasil (VIV)
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A Brazilian telecommunications group, Telefonica Brasil (NYSE:VIV) is one of the largest telecom stocks to buy in the South American country. It provides a wide range of services, including mobile and fixed-line voice services, broadband internet and pay television. One major factor that boosts its investment narrative is the long-term economic impact of Latin America.
Looking at the financials, Telefonica Brasil admittedly could use some shoring up on key areas. Nevertheless, its major bright spot centers on profitability. Not only does it consistently print annual net income, the company enjoys strong margins. For example, its operating margin clocks in at 17.14%, above 72.21% of sector rivals.
According to data from TipRanks, Telefonica Brasil offers a dividend yield of 2.77%. That may be on the low side compared to other telecom stocks to buy. However, VIV offers significant growth potential, with shares gaining nearly 33% since the January opener. Also, analysts rate VIV a moderate buy with a $10.56 price target, implying almost 23% upside.
Cogent Communications (CCOI)
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Based in Washington, D.C., Cogent Communications (NASDAQ:CCOI) is a multinational Internet service provider. Primarily, it focuses on Internet access and data transport, offered on a fiber optic, internet protocol data-only network. Since the start of the year, CCOI gained just under 7%. However, the road to this modest growth has been choppy, with shares gyrating wildly.
If I’m being perfectly honest, Cogent represents one of the riskier ideas among telecom stocks to buy. Let’s face it – some elements of its financials, particularly stability in the balance sheet could use some work. At the same time, there are some positives here as well. Perhaps most noticeably, it’s consistently profitable and features reliably positive free cash flow.
For the adventurous investor, Cogent carries a forward yield of 6.12%. While questions surround yield sustainability, it’s worth mentioning that the company enjoys 11 years of consecutive dividend increases. On a closing positive note, CCOI features a moderate buy consensus view and a $76 target, implying 23% growth.
Telecom Stocks to Buy: America Movil (AMX)
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A Mexican telecommunications firm, America Movil (NYSE:AMX) is the seventh largest mobile network operator in the world in terms of equity subscribers, according to its public profile. Fundamentally, America Movil offers an intriguing opportunity for forward-thinking investors. Because of its rapid growth, Mexico’s population is disproportionately young. That might play a major factor as the gears of globalization keep turning.
However, the market isn’t quite seeing the promising implications. Since the January opener, AMX slipped almost 8%. And in the past half-year period, it plunged nearly 20%. Nevertheless, the red ink makes America Movil rather attractive for contrarians. For example, AMX trades at a trailing earnings multiple of 11.35x and 4.2x operating cash flow. Both stats are undervalued compared to their sector averages.
According to TipRanks, the company offers a dividend yield of 4.17%. Also, its payout ratio is quite low at 11.74%. That right there makes a case for top telecom stocks to buy. Turning to Wall Street, analysts rate AMX a moderate buy with a $21.04 target, implying almost 25% growth.
Verizon (VZ)
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One of the most recognizable names among major telecom stocks to buy, Verizon (NYSE:VZ) is a multinational conglomerate. Featuring a range of services – including wireless, Internet and TV – Verizon is an indispensable component of commerce and everyday life. No, VZ hasn’t been encouraging in the slightest. Since the January opener, it hemorrhaged over 21% of market value. Still, the volatility may have some positives.
Fundamentally, Verizon practically commands permanent relevance. So, at some point, VZ should recover. What also gives me encouragement is that based on Fintel’s options flow data – which filters for big block trades likely made by institutions – we see solid volume for sold $30 puts expiring in January and April of next year.
Since sold options basically represent the inverse of bought options, the writer of these puts is possibly gambling that VZ won’t dip materially below $30. If it does, the option writer is responsible for fulfilling the contract at $30. Adding to the bullish reversal sentiment, analysts target VZ hitting $39.45, implying 25% growth.
Rogers Communications (RCI)
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For those that really want to dial up their risk-reward profile in telecom stocks to buy, we have Rogers Communications (NYSE:RCI). Interestingly, Rogers performed well through most of the first half of 2023. However, circumstances went ugly in the back half. Conspicuously, RCI tanked 22% in the trailing six-month period. Year-to-date, we’re talking a loss of more than 20%.
Certain incidents, such as its software update going catastrophically wrong in July did no favors for the company’s reputation. At the same time, the severe volatility in RCI created some interesting valuation schemes. What most stands out of course is that RCI now trades at 10.22X forward earnings. In contrast, the sector median stat clocks in at 12.81x.
Also, let’s not forget the passive income. Right now, the company carries a forward yield of 3.94%, above the communications sector’s average yield of 2.62%. Temptingly, the payout ratio sits at 38.34%, indicating confidence regarding yield sustainability. Finally, analysts rate VZ a consensus moderate buy with a $39.45 target, implying 25% upside.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
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