An Insider’s Trust Loves AT&T Inc. (T)

The closest peer for AT&T Inc. (NYSE:T) is Verizon Communications Inc. (NYSE:VZ); another large telecommunications company is Vodafone Group Plc (ADR) (NASDAQ:VOD), which holds a large stake in Verizon Wireless. In fact, for the past several months there has been speculation that Verizon Communications Inc. (NYSE:VZ) might enter into a transaction with Vodafone Group Plc (ADR) (NASDAQ:VOD) either to purchase the rest of VZW or to acquire the whole company and then spin out unwanted assets. This had been suggested by billionaire David Einhorn of Greenlight Capital, which has taken a position in Vodafone in anticipation of a potential deal (see Einhorn’s stock picks).

Each of these two stocks pays a high dividend yield as well, and at least in Verizon’s case the beta is low as well. Verizon trades at a small premium to AT&T on a forward earnings basis, with a P/E of 16, though that company has been managing to grow its sales and profits. While Vodafone shares access to the star asset of Verizon Wireless, its other operations are generally seen as not as attractive and so it trades at only 11 times forward earnings estimates.

AT&T offers a high yield, and if the company could manage to stabilize its earnings then it would look quite interesting from a value perspective considering the extensive buybacks (which should increase earnings per share over time). It appears to be a good pick for an income or defensive portfolio though certainly investors could look into Verizon’s prospects as a faster-growing telecommunications company as well.

Disclosure: I own no shares of any stocks mentioned in this article.