Vanguard Telecommunications Services ETF
Telecom doesn’t mean what it used to: wires and poles and standardized pricing models for your service. It’s now all about wireless and Internet services, and mobile phones. For some, the model even includes delivering cable television and security services to your home, too.
Of course, these services act much like utilities, and the stocks resemble them too — growth is sparse in much of the sector, but dividend yields sure aren’t. Charles Sizemore, for one, points out that while telecom’s big payouts are still a lure for investors, they face a big problem in that they’re all chasing the same customer base.
The Vanguard Telecommunications Services ETF contains most of the names in the space, including Verizon (VZ), AT&T (T), Sprint and Century Link (CTL) — VZ, T and CTL all sport 4%-plus yields. VOX itself has managed to hold up all right during the past few months, and the slow (but existent) economic recovery should mean a few more customers for plans (and a few upgrades in plans), which could help spur growth.
One big consideration, though, is that while the VOX holds 33 stocks, almost half of it is weighted in just Verizon and AT&T, so you’re not getting a terribly diversified fund. The upside is that the pair share a virtual duopoly, so you don’t have to worry about either falling off the face of the earth and sending the fund into a tailspin.