Telecom stocks have had a bumpy ride over the past few years as tech shifted and people began to rely on their providers much more heavily. After a bout of consolidation, failed mergers and acquisition rumors, many investors vowed to keep their hands off telecom stocks. However, the industry looks to be back on the upswing.
Although there will likely be bumps along the way, now might be a great time to pick up some bargain stocks before they make a full-fledged recovery.
With that in mind, there are a few different ways to play the telecom industry and here’s a look at five of the best stocks that could give you an in.
It would be impossible to talk about telecom stocks without adding Verizon (NYSE:VZ) stock to the list. Verizon is America’s largest wireless network and it has been slowly building out an empire that includes infrastructure, service and digital content. One thing is for sure when it comes to VZ stock — it’s not going to be a growth engine, but that’s not necessarily a bad thing. Verizon has been investing heavily in a 5G network and became the first telecom to offer the technology earlier this month.
5G is seen becoming a huge part of everyday life in the future as connected devices make their way into every household. As a first mover, VZ has an advantage and looks well poised to collect once 5G connectivity peaks.
VZ stock offers a respectable 4.22% dividend yield that looks relatively safe, which makes it a solid choice to invest in the future of the telecom space without taking on a great deal of risk.
When it comes to big names in telecom stocks, Verizon is on one end of the spectrum and AT&T (NYSE:T) stock is on the other. Where Verizon chose to have a laser focus on rolling out a 5G network, AT&T decided to diversify.
From its DirecTV purchase a few years ago to its more recent Time Warner acquisition, T stock is more than just a phone company. AT&T’s wireless business is seen making up only about 40% of its overall revenue this year.
However, now that T stock has firmly shifted its business model and begun paying down the debt it accrued making those changes, it has become an attractive investment opportunity among other telecom stocks.
T stock carries a lot more risk than most of its peers, but investors who believe in the firm’s decision to add entertainment and media to its company description are rewarded for sticking around. AT&T pays a 6.36% dividend yield — far above the industry average.
If you’re looking for something even riskier than T stock, T-Mobile US (NASDAQ:TMUS) could be worth considering. Like both AT&T and VZ, T-Mobile is slated to come out with its own 5G network, though it will be playing catch-up to VZ, which was the industry leader. Nevertheless, TMUS is poised to benefit from a boom in 5G connectivity and worth considering from that perspective.
On top of that, the stock has been weighed down by bad news regarding its proposed merger with Sprint (NYSE:S). Reports are that regulators aren’t happy with the deal as it has cast a negative shadow on TMUS stock, but analysts pointed out that the fact that regulators are willing to talk about the deal rather than turn it down immediately could actually be a good sign.
Whether the deal goes ahead or not, TMUS looks well positioned to thrive in the future. The company is not only working on 5G, but recently rolled out a banking feature that could disrupt traditional banks.
China Mobile (CHL)
If you thought Verizon was big, hold on to your hat because there’s one telecom you’re overlooking: China Mobile (NYSE:CHL). CHL stock represents a $200 billion business that serves the most customers in the world — roughly 900 million to be exact. Add to that the fact that China’s wireless market is far younger than that in the U.S., so there’s a much longer growth runway, and you have a pretty enticing telecom stock.
Of course, China Mobile carries a lot of risk simply because of its location. Not only will its success be dependent on the Chinese economy, which doesn’t have an impressive history of transparency, but it’s also state-run. That said, CHL stock stacks up against VZ with a dividend yield of 4.33% and makes for a great investment opportunity if you’re comfortable with the risks that come alongside investing in Chinese companies.
Crown Castle International (CCI)
The final choice on this list of telecom stocks — Crown Castle International (NYSE:CCI) — is a real estate investment trust (REIT) that owns and operates cell towers and fiberoptic networks. It makes money by renting out the infrastructure to carriers and that has given CCI a steady income that it redistributes to shareholders in the form of dividend payments.
CCI doesn’t have the same growth potential that many of the telecom stocks on this list do, but it looks well poised to benefit as connectivity continues growing. Demand for CCI’s infrastructure will only increase as 5G gains momentum and unlike companies like VZ and TMUS, Crown Castle doesn’t have to battle it out to hold on to subscribers. CCI stock wins as long as mobile usage and the demand for connectivity is growing — and that trend looks likely to continue for the foreseeable future.
As of this writing, Laura Hoy was long T.