The telecom industry is poised for significant growth and transformation, driven by advancements in technology, evolving consumer demands, and increasing digitalization across industries. Therefore, high-dividend telecom stocks, such as T-Mobile US, Inc. (TMUS), Verizon Communications Inc. (VZ), and AT&T Inc. (T) might be worthy additions for reliable income.
The increasing number of mobile subscribers, the surging demand for high-speed data connectivity, and the expanding need for value-added managed services are other significant contributors to telecom market growth. The global communication network has undoubtedly been one of the prominent areas for continued technological advancements over the past few decades.
The increased demand for ultra-fast connectivity and lower latency, driven by the growth of e-commerce retail and the proliferation of 5G technology, is a major market growth factor. The U.S. telecom market is forecast to increase by $129 billion at a CAGR of 7.4% by 2028.
So, let’s take a closer look at the fundamentals of three Telecom - Domestic stocks, beginning with #3.
Stock #3: T-Mobile US, Inc. (TMUS)
TMUS provides mobile communications services in the United States, Puerto Rico, and the Virgin Islands. The company offers customers voice, messaging, and data services in postpaid, prepaid, wholesale, and other services.
On December 12, 2024, TMUS, in partnership with Deutsche Telekom AG and its tech incubator hubraum, unveiled the top five U.S. finalists in the first-ever Telecommunications Network API Challenge.
The competition called on developers to use cutting-edge 5G standalone (SA) network APIs to create innovative solutions for businesses and consumers, showcasing the transformative potential of advanced network technologies.
On October 8, TMUS announced the introduction of 5G on Demand, a complete, portable 5G private network and services solution that includes setup, teardown, and network management. This new solution will help cut costs and enhance operational efficiency and flexibility. It should also help TMUS secure a top spot in the communications industry as it is catering to the growing needs of its customers.
TMUS pays a $3.52 per share dividend annually, translating to a 1.50% yield on the current share price. Its four-year dividend yield is 0.23%.
For the third quarter of 2024, which ended on September 30, TMUS’ total revenues increased 4.7% year-over-year to $20.16 billion, while its postpaid service revenues grew 8.3% from the same period last year to $13.31 billion.
The company’s adjusted EBITDA for the quarter amounted to $8.24 billion, representing an increase of 8.5% year-over-year. Its net income stood at $3.06 billion, up 42.8% year-over-year, while its earnings per share rose 43.4% from the prior year’s quarter to $2.61. Also, TMUS’ adjusted free cash flow grew 29% from the year-ago value to $5.16 billion.
Building on this quarter’s momentum, the company updated its guidance for 2024. TMUS anticipates that the full-year core adjusted EBITDA to range between $31.60 billion and $31.80 billion. It also forecasts adjusted free cash flow in the range of $16.70 billion to $17 billion and postpaid net customer additions between 5.6 million and 5.8 million.
The consensus revenue estimate of $21.40 billion for the fiscal fourth quarter (ending December 2024) represents a 4.5% increase year-over-year. The consensus EPS estimate of $2.34 for the current quarter indicates a 28.1% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
TMUS gained 42.5% over the past nine months to close its last trading session at $233.27.
TMUS’ POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TMUS has a B grade for Quality, Growth, and Stability. It is ranked #7 out of 20 stocks in the Telecom - Domestic industry.
For additional TMUS’ Value, Momentum, and Sentiment ratings, click here.
Stock #2: Verizon Communications Inc. (VZ)
VZ delivers a wide range of communication, technology, information, and entertainment solutions to consumers, businesses, and government organizations around the globe. It operates in two segments: Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
VZ pays a $2.71 per share dividend annually, translating to a 6.5% yield on the current share price. Its four-year dividend yield is 5.93%.
For the third quarter that ended September 30, 2024, VZ reported total operating revenues of $33.33 billion, and its operating income came in at $5.93 billion for the same period. The company’s net income and EPS totaled $3.41 billion and $0.78 for the quarter.
Furthermore, the company’s cash and cash equivalents stood at $4.99 billion as of September 30, 2024, compared to $2.06 billion as of December 31, 2023.
Analysts expect VZ’s revenue and EPS for the fourth quarter (ending December 2024) to grow 0.8% and 2.5% year-over-year to $35.39 billion and $1.11, respectively.
Shares of VZ have surged 5.8% over the past six months and 12.8% over the past year to close the last trading session at $42.08.
VZ has an overall B rating, equating to a Buy in our proprietary rating system. VZ also has a B grade for Growth and Stability. It is ranked #6 in the same industry.
To see additional POWR Ratings for Momentum, Sentiment, Value, and Quality, click here.
Stock #1: AT&T Inc. (T)
T offers telecommunications and technology services. It has two operational segments: Communications and Latin America. The company’s offerings include wireless voice and data communications services, handsets, wireless data cards, AT&T Dedicated Internet, Ethernet, data services, cloud solutions, and more.
On September 30, T announced an agreement to sell its entire 70% stake in DIRECTV to TPG. This move sharpens T’s focus on its core strengths as a leading wireless 5G and fiber connectivity provider in the United States. The transaction also bolsters T’s balance sheet by accelerating cash flow anticipated over the coming years.
T pays a $1.11 per share dividend annually, translating to a 4.7% yield on the current share price. Its four-year dividend yield is 6.3%.
For the fiscal 2024 third quarter that ended September 30, T’s total operating revenues came in at $30.21 billion. Its adjusted operating income was reported to be $6.51 billion. The company’s adjusted EBITDA increased 3.4% year-over-year to $11.58 billion. Plus, its net income and adjusted EPS came in at $145 million and $0.60, respectively.
The consensus revenue and EPS estimates of $123.69 billion and $2.22 for the fiscal year ending December 2025 exhibit a year-over-year rise of 1.3% and 0.2%, respectively.
Shares of T have gained 32.7% over the past six months and 42.4% over the past year, closing the last trading session at $23.36.
T’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Growth. Within the same industry, T is ranked #5.
Click here to access additional ratings of T for Sentiment, Value, Momentum, Quality, and Stability.
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TMUS shares were trading at $232.42 per share on Friday afternoon, down $0.85 (-0.36%). Year-to-date, TMUS has gained 47.10%, versus a 28.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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