Dividend Paying Telecoms Stocks Buck Market Slump

2019 OUTLOOK: Telco stocks were among the few bright spots for 2018 returns - and continue to offer income and growth in the New Year

Michael Hodel 2 January, 2019 | 12:32PM

Vodafone undervalued equity stocks UK telecoms

Telecom stocks across the globe have held up well amid the market’s recent turbulence, with the Morningstar Global Communication Services Index down only 5% in the fourth quarter versus a 14% drop for the broader market. We continue to believe that Europe offers a particularly attractive hunting ground for value, with our telecom coverage there trading at a 24% discount to our fair value estimates.

Telecom stocks in the US look more reasonably priced, trading at a 15% discount, but opportunities still exist. We suspect investors remain negative on European telecom stocks for a variety of reasons, including limited revenue growth potential, often complex operating structures, and, in many cases, exposure to emerging markets, where weak currencies have created messy financial results in recent quarters.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Comcast Corp Class A43.00 USD-0.50
Telefonica SA3.68 EUR0.00
Vodafone Group PLC117.96 GBX0.15

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Michael Hodel  

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