Some telecom companies deliver outstanding dividend yields and rank among the highest dividend yields of all companies. According to GuruFocus’ list of Highest-Yielding Telecom Dividend Stocks in Gurus’ Portfolios, these are the telecom companies that reward their shareholders with the highest dividend yields in the industry: Portugal Telecom SGPS S.A. ADS (PT, Financial), Partner Communications Company Ltd. (PTNR, Financial), Frontier Communications (FTR, Financial), Telefonica S.A. ADS (TEF, Financial) and France Telecom ADS (FTE, Financial). Most of these stocks’ prices have fallen to new 52-week lows recently.
Partner Communications Company Ltd. (PTNR)
Partner Communications Company, founded in 1999, has the highest dividend yield in the telecom industry at 16.1%, and one of the lowest P/E ratios at 5.1. The company is engaged in the only global system for mobile communications mobile telephone network operator in Israel.
Partner Communications has increased its free cash flow every consecutive year since 2005, most recently generating $420 million in 2010. It has a strong cash position of $90 million, which is its highest in at least 10 years. Gross and net margins have both remained fairly steady or improved over the last 10 years.
In the second quarter of 2011, total revenues increased 12.6%, earnings decreased 9.3%, and free cash flow decreased 54.9%. The company added 26,000 net new additions to its cellular subscriber base, for a total subscriber base of 3.175 million. No dividend was declared. The company’s CEO, Yacov Gelbard, explained, “The quarterly financial results reflect the continuing negative impact of the regulatory interconnect tariffs and the intensified competition in the market.”
Partner Communications had a 32% share of Israel’s cellular market as of June 2009, while rivals Cellcom had 35%, Pelephone had 29% and MIRS had 4%. The stock hit a 52-week low of $9.31 on Thursday.
Portugal Telecom SGPS S.A. ADS (PT)
Portugal Telecom pays a dividend yield of 13.2%. Portugal Telecom Group is the largest telecommunications and multimedia company in Portugal. At the national level, the company offers local, long distance and international telephone service, as well as circuit rental. In areas of free competition, the services include cellular phones, paging, cable TV, data communication, value added and broadcasting.
Portugal, the company’s home market, is mired in recession, and the company experienced a decline in free cash flow each consecutive year since 2007, most recently garnering $513 million in 2010. Likewise, revenue has declined from its 10-year high of $9.9 billion in 2008 to a 10-year low of $5 billion in 2010. Margins, however, have remained fairly steady or increased in recent years.
In the second quarter of 2011, the company reported a loss of €136.7 million, a year over year decline from €27.8 million.
On Thursday, Portugal Telecom’s stock price reached a new 52-week low of $7.02. It has traded in a 52-week range of $7.00 - $15.24 per share and is down 44% over the last year.
Frontier Communications (FTR)
Frontier Communications Corporation has a dividend yield of 11.9%. The company, formerly named Citizens Communications Company, is a full-service communications provider and one of the largest rural local exchange telephone companies in the country. Frontier Communications offers telephone, television and Internet services, including wireless Internet data access, as well as bundled offerings, ESPN360 streaming video, security solutions and specialized bundles for small businesses and home offices.
Frontier Communications has been reviving its free cash flow since it fell in 2008. That year it generated $452 million, and in 2010, $644 million. Its revenue increased to a record $3.8 billion in 2010. Operating margins have fallen significantly, down each year from 55.3% in 2007 to 43.90% in 3020.
In the second quarter, Frontier’s business grew by 7,400 high-speed Internet customers. From July 2010 to the end of second quarter 2011, Frontier expanded its broadband to 466,000 new homes and plans to reach 1 million homes by the time it completes its expansion in 2013.
The company’s second quarter revenue declined to $1.3 billion compared to $1.4 billion sequentially, but increased from $516.1 million compared to last year. Increase was related to revenue from properties acquired on July 1, 2010, and partially offset by a decline of $19.2 million for its Frontier legacy operations results. On July 1, the company acquired Verizon’s local exchange business in 14 states, including certain customer relationships for wholesale services.
Because the company’s earnings are only 17 cents per share, and its dividend is 75 cents, this dividend is ultimately unsustainable.
Frontier’s stock price hit a new 52-week low Thursday at $6.24.
France Telecom ADS (FTE)
France Telecom pays a dividend yield of 10.9%. It is one of the world's largest telecommunications carriers and the third largest in Europe. In addition to local, long-distance and international telephony, France Telecom provides businesses and consumers with data, wireless, multimedia, Internet, broadcasting and cable-TV services. A public stock corporation since Dec. 31, 1996, France Telecom held an initial public offering in October 1997.
France Telecom’s free cash flow has been falling since it made $11.8 billion in 2008, to $8.9 billion in 2010, as have revenues which fell from $78.7 billion in 2008 to $60.4 billion in 2010, their lowest since 2003.
France Telecom’s first quarter results, reported on May 3, 2011, were in line with its guidance for 2011. It saw a 7% year over year increase in total customers to 215.9 million, led by 25% mobile growth in Africa and the Middle East. Consolidated revenues increased 0.4% to €11.228 billion, excluding the impact of regulatory measures. The company said in a statement that it was facing intensified competition in France and exceptional political conditions in certain emerging markets.
The company’s stock price fell below its 52-week low on Thursday when it fell to $15.21.
Telefonica S.A. ADS (TEF)
Telefonica S.A. pays a dividend yield of 9%. Telefonica is the largest supplier of telecommunications services in the Spanish and Portuguese speaking world. They provide fixed-link public voice telephone, mobile phone service, Internet access, data transmission, directories and broadcast media.
Telefonica’s free cash flow has slid each year from $12.9 billion in 2008 to $10.7 billion in 2010, though revenue jumped from $79.1 billion in 2009 to $88.5 billion in 2010. All of the company's margins have improved over the last several years.
The company’s first-half financial results show a 6.2% increase in revenues to €30.886 billion year over year. Latin America was the key growth driver and the largest contributor to consolidated revenue at 46% of the total. Revenue derived from Spain fell 6.1% and revenue from Europe fell 1.2%.
The greatest challenges the company faces are dim market conditions and the impact of regulation on its business. Brazil will likely become Telefonica’s main source of revenue where its integration of its fixed and mobile business will allow it to capture synergies of €3.7 billion - €4.6 billion.
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Partner Communications Company Ltd. (PTNR)
Partner Communications Company, founded in 1999, has the highest dividend yield in the telecom industry at 16.1%, and one of the lowest P/E ratios at 5.1. The company is engaged in the only global system for mobile communications mobile telephone network operator in Israel.
Partner Communications has increased its free cash flow every consecutive year since 2005, most recently generating $420 million in 2010. It has a strong cash position of $90 million, which is its highest in at least 10 years. Gross and net margins have both remained fairly steady or improved over the last 10 years.
In the second quarter of 2011, total revenues increased 12.6%, earnings decreased 9.3%, and free cash flow decreased 54.9%. The company added 26,000 net new additions to its cellular subscriber base, for a total subscriber base of 3.175 million. No dividend was declared. The company’s CEO, Yacov Gelbard, explained, “The quarterly financial results reflect the continuing negative impact of the regulatory interconnect tariffs and the intensified competition in the market.”
Partner Communications had a 32% share of Israel’s cellular market as of June 2009, while rivals Cellcom had 35%, Pelephone had 29% and MIRS had 4%. The stock hit a 52-week low of $9.31 on Thursday.
Portugal Telecom SGPS S.A. ADS (PT)
Portugal Telecom pays a dividend yield of 13.2%. Portugal Telecom Group is the largest telecommunications and multimedia company in Portugal. At the national level, the company offers local, long distance and international telephone service, as well as circuit rental. In areas of free competition, the services include cellular phones, paging, cable TV, data communication, value added and broadcasting.
Portugal, the company’s home market, is mired in recession, and the company experienced a decline in free cash flow each consecutive year since 2007, most recently garnering $513 million in 2010. Likewise, revenue has declined from its 10-year high of $9.9 billion in 2008 to a 10-year low of $5 billion in 2010. Margins, however, have remained fairly steady or increased in recent years.
In the second quarter of 2011, the company reported a loss of €136.7 million, a year over year decline from €27.8 million.
On Thursday, Portugal Telecom’s stock price reached a new 52-week low of $7.02. It has traded in a 52-week range of $7.00 - $15.24 per share and is down 44% over the last year.
Frontier Communications (FTR)
Frontier Communications Corporation has a dividend yield of 11.9%. The company, formerly named Citizens Communications Company, is a full-service communications provider and one of the largest rural local exchange telephone companies in the country. Frontier Communications offers telephone, television and Internet services, including wireless Internet data access, as well as bundled offerings, ESPN360 streaming video, security solutions and specialized bundles for small businesses and home offices.
Frontier Communications has been reviving its free cash flow since it fell in 2008. That year it generated $452 million, and in 2010, $644 million. Its revenue increased to a record $3.8 billion in 2010. Operating margins have fallen significantly, down each year from 55.3% in 2007 to 43.90% in 3020.
In the second quarter, Frontier’s business grew by 7,400 high-speed Internet customers. From July 2010 to the end of second quarter 2011, Frontier expanded its broadband to 466,000 new homes and plans to reach 1 million homes by the time it completes its expansion in 2013.
The company’s second quarter revenue declined to $1.3 billion compared to $1.4 billion sequentially, but increased from $516.1 million compared to last year. Increase was related to revenue from properties acquired on July 1, 2010, and partially offset by a decline of $19.2 million for its Frontier legacy operations results. On July 1, the company acquired Verizon’s local exchange business in 14 states, including certain customer relationships for wholesale services.
Because the company’s earnings are only 17 cents per share, and its dividend is 75 cents, this dividend is ultimately unsustainable.
Frontier’s stock price hit a new 52-week low Thursday at $6.24.
France Telecom ADS (FTE)
France Telecom pays a dividend yield of 10.9%. It is one of the world's largest telecommunications carriers and the third largest in Europe. In addition to local, long-distance and international telephony, France Telecom provides businesses and consumers with data, wireless, multimedia, Internet, broadcasting and cable-TV services. A public stock corporation since Dec. 31, 1996, France Telecom held an initial public offering in October 1997.
France Telecom’s free cash flow has been falling since it made $11.8 billion in 2008, to $8.9 billion in 2010, as have revenues which fell from $78.7 billion in 2008 to $60.4 billion in 2010, their lowest since 2003.
France Telecom’s first quarter results, reported on May 3, 2011, were in line with its guidance for 2011. It saw a 7% year over year increase in total customers to 215.9 million, led by 25% mobile growth in Africa and the Middle East. Consolidated revenues increased 0.4% to €11.228 billion, excluding the impact of regulatory measures. The company said in a statement that it was facing intensified competition in France and exceptional political conditions in certain emerging markets.
The company’s stock price fell below its 52-week low on Thursday when it fell to $15.21.
Telefonica S.A. ADS (TEF)
Telefonica S.A. pays a dividend yield of 9%. Telefonica is the largest supplier of telecommunications services in the Spanish and Portuguese speaking world. They provide fixed-link public voice telephone, mobile phone service, Internet access, data transmission, directories and broadcast media.
Telefonica’s free cash flow has slid each year from $12.9 billion in 2008 to $10.7 billion in 2010, though revenue jumped from $79.1 billion in 2009 to $88.5 billion in 2010. All of the company's margins have improved over the last several years.
The company’s first-half financial results show a 6.2% increase in revenues to €30.886 billion year over year. Latin America was the key growth driver and the largest contributor to consolidated revenue at 46% of the total. Revenue derived from Spain fell 6.1% and revenue from Europe fell 1.2%.
The greatest challenges the company faces are dim market conditions and the impact of regulation on its business. Brazil will likely become Telefonica’s main source of revenue where its integration of its fixed and mobile business will allow it to capture synergies of €3.7 billion - €4.6 billion.
Get more high-yield dividend stocks as a group or divided by industry at GuruFocus’ High-Yield Dividend Stocks in Gurus’ Portfolios list. Also check out: (Free Trial)
