Five Telecom ETFs for Steady Returns and Strong Dividends

Joel Anderson |

It’s hard to imagine, but just 15 years ago the cell phone wasn’t the totally ubiquitous presence it is today. Now? One’s service provider is a relationship that’s difficult to sever and incredibly important.

And the telecom industry has changed in deep and fundamental ways that few other sectors can claim. As people scramble to upgrade their phones as fast as Apple (AAPL) and Samsung (SSNLF) can crank them out, one’s data plan has to be humming to take full advantage of the latest gadgets. This means the most important thing to any phone company is wireless spectrum, with auctions netting big offering prices and wireless companies planning on buying large chunks that used to belong to television stations by June of next year. In fact, the rush away from landlines is so rapid that many of those destroyed by Super Storm Sandy aren’t going to be replaced. The number of copper phone wires peaked in 2000 at 186 million, but 100 million have since been disconnected and some industry experts speculate the day isn’t far away when efforts to recover the copper itself will be a profitable enterprise.

However, while the game in telecom today would be almost unrecognizable to an industry expert from 20 years ago, investing in telecom remains fairly similar to the way it’s always been. Telecom stocks remain a defensive play, offering limited but consistent and safe returns. They also tend to some with pretty hefty dividends, with the sectors leading companies, AT&T ($ATT) and Verizon (VZ) both offering quarterly payouts in excess of 4 percent (5.08 percent and 4.23 percent, respectively). And for those looking for a broad, defensive play with a nice dividend, look no further than telecom ETFs. While the current run the market’s on might not have one thinking of safe plays, the day may be near when telecom beckons again.

iShares Dow Jones US Telecommunications Sector Index Fund ($IYZ)

Index: Dow Jones U.S. Select Telecommunications Index

Dividend yield: 2.66 percent



Top 3 holdings: AT&T ($ATT) – 13.06 percent, Verizon (VZ) – 12.02 percent, Crown Castle International Corp. (CCI) – 8.18 percent

Expense ratio: 0.48 percent

iShares S&P Global Telecommunications Sector Index Fund ($IXP)

Index: S&P Global Telecommunications Sector Index

Dividend yield: 3.65 percent

Top 3 holdings: AT&T ($ATT) – 14.5 percent, Vodafone Group (VOD) – 14.05 percent, Verizon (VZ) – 11.09 percent

Expense ratio: 0.48 percent

Vanguard Telecommunications Services ETF (VOX)

Index: MSCI US Investable Market Telecommunications Services 25/50 Index

Dividend yield: 2.92 percent

Top 3 holdings: Verizon (VZ) – 22.3 percent, AT&T ($ATT) – 22.2 percent, Crown Castle International (CCI) – 5.1 percent

Expense ratio: 0.14 percent

SPDR S&P Telecom ETF ($XTL)

Index: S&P Telecom Select Industry Index

Dividend yield: 2.11 percent

Top 3 holdings: Ubiquiti Networks (UBNT) – 3.01 percent, ARRIS Group (ARRS) – 2.79 percent, Sprint (S) – 2.71 percent

Expense ratio: 0.35 percent

SPDR S&P International Telecommunications Sector ETF ($IST)

Index: S&P Developed Ex-U.S. BMI Telecommunication Services Sector Index

Dividend yield: 3.23 percent

Top 3 holdings: Vodafone Group (VOD) – 20.35 percent, SoftBank Corp. (SFTBF) – 8.81 percent, Telefonica (TEF) – 7.89 percent

Expense ratio: 0.50 percent

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
TEF Telefonica SA 10.36 -0.16 -1.52 566,703 Trade
AAPL Apple Inc. 155.20 -4.56 -2.85 29,346,970 Trade
S Sprint Corporation 7.10 0.05 0.64 8,466,740 Trade
VOD Vodafone Group Plc 28.92 -0.06 -0.21 1,200,400 Trade
VZ Verizon Communications Inc. 49.59 0.94 1.92 22,319,063 Trade
ARRS ARRIS International plc 27.62 -0.15 -0.54 267,708 Trade
CCI Crown Castle International Corp. (REIT) 103.35 2.39 2.37 2,528,387 Trade
UBNT Ubiquiti Networks Inc. 61.76 0.30 0.49 151,090 Trade
CAGDF Centerra Gold Inc 7.40 0.08 1.08 4,483

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