Why Telecoms Stocks Replace Tobacco for Income Seekers

For equity investors, demand for data translates into a durable stream of revenues for the telecoms operators as the investment credentials of tobacco are gradually eroding

Liontrust Asset Management 23 March, 2016 | 12:01PM
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Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Liontrust Asset Management’s Stephen Bailey asks: are telecoms the new equity income addiction sector?

As a manager of a thematic investment process which is built around identifying trends in social, economic and political spheres, it has been interesting for me to note the changing nature of consumer addictions. For any of you with teenage children, one of the most obvious addictions is to data – on mobile phones, tablets and computers. Could you imagine your children giving up their mobile phones for Lent, or switching to a ‘dumb phone’ of the type we had 20 years ago when a phone was a phone and not a mini tablet? For that matter, could you do without it?

For equity investors, this demand for data translates into a durable stream of revenues for the telecoms operators. While the defensive characteristics of telecoms shouldn’t be a surprise to anyone, we think the sector’s ability to generate recurring revenues and sustainable growth in dividends is still underappreciated at current share price valuations, which are generally at a discount to the market.

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About Author

Liontrust Asset Management  provides investment services and asset portfolio management in UK, European, Asian and Global equities, Global credit and Multi-Asset