April 26, 2023
The telecommunication sector comprises companies that facilitate global communication. These companies have built and maintained the infrastructure that allows for the exchange of media via phone, web, or over airwaves or cables. Since the 2000s the industry has been through main changes: streamlined through deregulation, and challenged by technological competition.
The telecommunications sector is grouped into three tiers in descending size: equipment, services and wireless communication. Wireless communication is poised to continue its significant global growth as ever-more people move to smart phones and cloud-based technology continues.
Though you should always check with an advisor, many say that telecom companies can be great sources of long-term positive growth with reliable dividend yield, which could be an attractive option in uncertain markets. The largest telecom companies can vary from year to year, and their ranking can change depending on the criteria by which they are measured by total sales numbers or by market capitalization value.
Advisors at Morningstar recently highlighted these eight telecom companies for paying dividends of 3% or more:: Verizon Communications (Tii:VZ) 6.9%; AT&T (Tii:T) 5.9%; Deutsche Telekom AG (Tii:DTEGY) 3.2%; BCE (Tii:BCE) 6.4%; Orange SA (Tii:ORAN) 6.3%; Vodafone Group (Tii:VOD) 8.7%; Rogers Communications (Tii:RCI) 3.2%; Telenor ASA (Tii:TELNY) 7.9%. These are the primary telecom companies for the U.S., Canada, France, Germany, Spain and Norway.
ETF’s (exchange-traded funds) are an alternative to directly investing in the telecom firms individually, and there are several of them to consider. A few of the more popular funds are The Vanguard Communication Services ETF (Tii:VOX); the iShares US Telecommunications ETF (Tii:IYZ) and the iShares Global Comm. Services ETF (Tii:IXP). The first two ETF’s have more of a US stock composition, where the third is more internationally focused.
The industry continues to grow, with advances in high speed mobile services driving competition and demand booming in emerging economies like China and India. This drive is affecting the ability of hardware manufacturers to keep up. With the industry hyper-focused on providing faster data services, chiefly in the area of high-resolution video, the goal is to provide faster and more clear services, with better connectivity and multi-application fluidity. Investment advisors point out that the consistent demand for basic services (voice and data), combined with extensive subscription plans, provide a stable source of revenue for major telecom firms in the future.
According to Forbes Advisor, some of the advantages to investing in telecom stocks is innovation and a potential for high growth directly tied to their relationship to new technology. The telecom sector is a basic service that most people extensively utilize, so drop offs in sales are rare.
One of the drawbacks or more risky aspects of investing in Telecom stocks, according to Forbes Advisor, is an elevated volatility. Because the market is highly competitive between companies that provide similar services, disruption can be a real threat for these stocks. FCC regulations have an impact on communications companies, and can be greatly impacted by changes in legislation.
Analysts predict continued innovations to foster growth and success of the industry as well as an increase in mergers and acquisitions. As with all financial decisions, it is important to consult a financial advisor prior to investing.
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