The telecommunications industry is significantly expanding, driven by the emergence of AI technology and the growing demand for high-quality communication. Given the industry’s bright prospects, it could be wise to invest in fundamentally strong telecom stocks Spok Holdings, Inc. (SPOK), Verizon Communications Inc. (VZ), and AT&T Inc. (T) with high-yielding dividends.
The telecommunications market is witnessing strong growth due to increasing demand for high-speed internet services, driven by the rapid pace of digitalization and remote work trends. Therefore, the U.S. telecom market is projected to grow at a CAGR of 7.4% by 2028.
Moreover, telecommunication companies are adopting AI technologies to automate and streamline communication processes. They are also using AI to improve customer experience, monitor and manage network operations, prevent fraud, and perform predictive maintenance. The global generative AI in the telecom market is expected to grow at a CAGR of 51% by 2033.
Considering these conducive trends, let’s assess the fundamentals of the three Telecom - Domestic industry picks, beginning with the third choice.
Stock #3: Spok Holdings, Inc. (SPOK)
SPOK provides healthcare communication solutions in the United States, Europe, Canada, Australia, Asia, and the Middle East. Its products and services enhance workflows for clinicians and support administrative compliance. It also delivers clinical information to care teams to improve patient outcomes and offers GenA Pager, a one-way alphanumeric pager.
The company distributes an annual dividend of $1.25, which yields 8.5% on the current market price, higher than the four-year average dividend yield of 8.39%. Its dividend payouts have grown at a CAGR of 35.7% over the past three years.
SPOK’s trailing-12-month EBIT margin of 15.11% is 59.5% higher than the industry average of 9.47%. Further, the stock’s trailing-12-month gross profit margin and net income margin of 69.71% and 11.19% are 37.1% and 244.5% higher than the industry averages of 50.84% and 3.25%, respectively.
SPOK’s total revenue for the second quarter that ended June 30, 2024, was reported at $33.98 million. Its net income and net income per share stood at $3.43 million and $0.17, respectively. In addition, the company’s adjusted EBITDA came in at $7.05 million.
Analysts expect SPOK’s revenues to be $35.24 million in the fiscal third quarter ending September 2024. Its EPS for the same quarter is expected to be $0.19. It surpassed the consensus revenue estimates in three of the trailing four quarters.
SPOK’s stock has gained 12.8% over the past year to close the last trading session at $14.75.
SPOK’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality. SPOK is ranked #6 among 18 stocks in the Telecom - Domestic industry.
Click here to access all SPOK’s ratings (Value, Stability, Growth, Momentum, and Sentiment).
Stock #2: Verizon Communications Inc. (VZ)
VZ provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments: Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
On August 7, 2024, VZ announced the launch of a newly established program designed to help strengthen partnerships with vendors in the public safety and mission-critical communications industry.
The “Verizon Frontline-Verified” program offers a special designation to vendors whose products have been tested and met the rigorous standards required for public safety use on the Verizon network. The products eligible for this status were specifically designed to assist public safety officials and first responders during all types of hazards and emergencies.
The company distributes an annual dividend of $2.66, which yields 6.51% on the current market price, higher than the four-year average dividend yield of 5.78%. Its dividend payouts have grown at a CAGR of 2% over the past three years.
In terms of the trailing-12-month EBITDA margin, VZ’s 35.84% is 92.2% higher than the 18.64% industry average. Its 12.49% trailing-12-month Capex / Sales is 246.6% higher than the 3.60% industry average. Likewise, the stock’s 22.54% trailing-12-month EBIT margin is 138% higher than the 9.47% industry average.
VZ’s total revenues for the fiscal second quarter that ended June 30, 2024, were reported at $7.30 billion. The company’s adjusted EPS was reported at $1.15. In addition, its adjusted EBITDA increased 10.1% year-over-year to $12.30 billion.
For the quarter ending September 2024, VZ’s revenue is expected to increase 1.2% year-over-year to $33.74 billion. Its EPS for the quarter is expected to be $1.18. VZ surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of VZ have surged 11.2% over the past nine months to close the last trading session at $40.85.
VZ’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
VZ has a B grade for Stability. It is ranked #5 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have VZ ratings for Momentum, Sentiment, Value, Quality, and Growth. Get all VZ ratings here.
Stock #1: AT&T Inc. (T)
T provides telecommunications and technology services worldwide. The company operates through two segments: Communications and Latin America.
The company distributes an annual dividend of $1.11, which yields 5.70% on the current market price.
In terms of the trailing-12-month Return on Common Equity, T’s 12.08% is 238.7% higher than the 3.57% industry average. Its 10.41% trailing-12-month net income margin is 220.5% higher than the 3.25% industry average. Likewise, the stock’s 5.72% trailing-12-month Return on Total Capital is 51.1% higher than the 3.79% industry average.
T’s revenue for the second quarter that ended June 30, 2024, increased 10.8% year-over-year to $1.13 billion. Its net income came in at $15.97 million, compared to a loss of $16.76 million in the previous-year quarter. Also, its earnings per common share came in at $0.02, compared to a loss per share of $0.72 in the previous-year quarter.
For the quarter ending September 2024, T’s revenue is expected to increase marginally year-over-year to $30.50 billion, and its EPS is expected to be $0.57.
Over the past year, the stock has gained 38.7% to close the last trading session at $19.49.
T’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Value and Quality. Within the same industry, T is ranked #2.
Click here to access additional T ratings for Stability, Growth, Momentum, and Sentiment.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
VZ shares were trading at $40.94 per share on Wednesday afternoon, up $0.09 (+0.22%). Year-to-date, VZ has gained 14.05%, versus a 18.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 High-Yielding Telecom Stocks to Keep on Your Radar StockNews.com
