China Mobile Stock Offers Both Income and Price Appreciation Potential

Mainland China and Hong Kong telecommunications services provider China Mobile (NYSE:CHL) isn’t heatedly discussed among financial-news pundits in America. You won’t hear much about CHL stock on U.S.-based message boards either.

A banner outside a China Mobile (CHL) store in Beijing, China.
Source: testing / Shutterstock.com

Thus, depending on your location, CHL stock might be flying almost entirely under the radar. Yet InvestorPlace contributor Faizan Farooque identified the name as one of four great emerging-market stocks for investors’ portfolios.

So there must be something about CHL stock that makes it worth examining. And actually, China Mobile has a few notable features that could justify taking a long position in its shares.

It’s true that investing in emerging markets isn’t appealing to everyone. It typically requires more research for investors who are not familiar with companies’ home countries.

Yet China Mobile is an important company, and I would argue that it’s worth considering even for investors who have never owned a stake in an Asian telecom company before.

A Closer Look at CHL Stock

Two crucial numbers stand out in regard to China Mobile. The first one should appeal greatly to income-focused investors; I’m referring to the stock’s forward annual dividend yield of 5.95%.

Just for reference, we can compare this to the forward annual dividend yield offered by American telecom giant Verizon Communications (NYSE:VZ). With Verizon yielding 4.2%, China Mobile compares favorably to its American counterpart.

Then there’s the other number that stands out, which is China Mobile’s trailing 12-month price-earnings ratio of 7.6.  That’s more attractive than Verizon’s trailing P/E ratio of 12.95.

All in all, China Mobile  has attractive features for both income and value seekers. And since CHL stock has bounced off of the low $30s price level in the past,  traders who focus on technicals might want to pick up some shares at its current level, as well.

A Market Leader

Investing in a company located in an emerging market requires an understanding of how each company is positioned within its market. Investors have to determine if the firm is a leader or an also-ran.

In the Chinese territories where the company operates, China Mobile is just as important as Verizon is in America. Some folks might even argue that China Mobile is more influential than Verizon.

Comparisons aside, it’s almost inarguable that China Mobile is a bellwether company in the Chinese telecom sector. Analytics firm Moody’s, which recently issued a highly positive assessment of China Mobile  seems to concur with this position.

Citing China Mobile’s  “leading market position” among other factors, Moody’s assigned China Mobile a coveted “A1” issuer rating and a “stable” outlook.

Strength in Numbers

To justify its positive rating, the analytics firm provided some stats to show just how massive this company really is.

As of the end of June 2020, China Mobile had:

  • An overall market share of 59% in a regional market marked by “intense competition”
  • An extensive network of 4.72 million base stations
  • 188,000 5G base stations put into service throughout more than 50 Chinese cities

What do these impressive numbers mean for CHL stock holders? Farooque, the InvestorPlace columnist, summed up the value proposition offered by the company which has such a massive, entrenched presence in China:

“[L]ike a host of other Chinese state-backed firms, China Mobile is too big to fail due to its strategic importance in the country and its infrastructure. So you need not worry about the company going belly-up in the face of any issue.”

For better or for worse, the concept of being “too big to fail” isn’t uniquely American. And so, even if CHL stock is down, it won’t likely fall too far as long as China Mobile is considered to be an integral part of the Chinese telecom sector.

The Bottom Line

I concur with the positive assessments of Farooque and Moody’s. For investors who don’t mind the idea of buying the shares of a company that’s “too big to fail,” CHL stock offers terrific value and a dividend yield that’s hard to resist.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2020/09/chl-stock-offers-both-income-and-price-appreciation/.

©2020 InvestorPlace Media, LLC