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
Expense ratio: 0.48 percent
iShares S&P Global Telecommunications Sector Index Fund ($IXP)
Index: S&P Global Telecommunications Sector Index
Dividend yield: 3.65 percent
Expense ratio: 0.48 percent
Vanguard Telecommunications Services ETF (VOX)
Index: MSCI US Investable Market Telecommunications Services 25/50 Index
Dividend yield: 2.92 percent
Expense ratio: 0.14 percent
SPDR S&P Telecom ETF ($XTL)
Index: S&P Telecom Select Industry Index
Dividend yield: 2.11 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
Expense ratio: 0.50 percent
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