Searching for stocks that benefit from the spread of mobile phone availability around the world and the boom in communications this has elicited?
Give telecommunications stocks a look. In this lesson, we’ll explain what telecommunications stocks are, as well as their typical characteristics and where to look to find stocks to invest in. We’ve also prepared a list of telecommunications stocks you can consider for potential buys.
What are telecommunications stocks?
Telecommunications stocks are stocks of companies that provide voice and data services through mobile phones, digital subscriber lines, local phone service carriers, and the Internet. In short, they are stocks in companies that enable people to communicate with one another from a distance.
Why do investors look for telecommunications stocks?
Once considered a luxury item, smartphones have become ubiquitous all over the world and are a key part of the global economy. That rapid customer adoption combined with advances in wireless technology and other forms of mobile communication has spawned a raft of big winners among telecom stocks.
What are the defining characteristics of telecommunications stocks?
1) The key word Is communication
As the world becomes more connected, telecommunications stocks reap the benefits. While smartphones have emerged as the dominant technology of today, telecom companies stand ready to adapt and ride whatever the next wave of communication might be.
2) They make money as adoption grows in developing countries
Many developing countries have a long way to go when it comes to becoming fully connected. That creates a huge untapped market of potential customers, particularly in Africa, Latin America, and much of Asia.
3) There’s also room for growth in more developed countries
As new forms of technology emerge, consumers in developed countries will often switch to the latest and greatest new thing. Think of the rush to buy new iPhones whenever the latest version comes out, and you can see that phenomenon at work. People are always on the lookout for the new innovation that will improve their lives, and the company that comes up with it first ends up winning big.
4) They benefit from government help
World governments invest heavily in communication infrastructure to ensure their citizens stay connected. Telecom companies reap the benefits, in the form of greater product adoption and more growth.
Here are some examples
Here are a few examples of well-performing telecommunications stocks, along with short summaries as to why you might consider investing in them.
1) T-Mobile US (TMUS)
In June 2020, T-Mobile’s stock vaulted to its highest point in two decades. The mobile phone service provider merged with fellow mobile phone service company Sprint in April 2020, demonstrating its desire to expand and grow as a business in the future.
2) Verizon (VZ)
Another American mobile phone service provider, Verizon falls under the category of telecom value stocks. The stock carries a modest price-to-earnings ratio of 13-to-1, with a healthy dividend yield of 4.2%.
3) Charter Communications (CHTR)
This cable operator and broadband communications services provider’s stock shook off the effects of the COVID-19 market downturn, surging to a new all-time high in early June 2020. As the world went into lockdown, companies such as Charter Communications benefitted from an increased need for digital communication.
4) American Tower (AMT)
American Tower is another telecom stock that marked a new all-time high in June 2020. The company operates as a real estate investment trust, though that real estate consists of cell phone towers, with American Tower operating more of them in the United States than any other company.
How do I find telecommunications stocks?
You’ll find multiple investment websites that offer screening tools to help you find the best telecommunications stocks, based on parameters such as earnings growth and revenue growth. You can also find the best telecommunications stocks right here on this site, with our monthly lists of telecom stocks on the rise.
Visit this guide for more information on how to find telecommunications stocks >
Now that you have a better understanding of telecommunications stocks, click to check out our next lesson on industrial stocks.