There are a few solid dividend stocks in the telecom industry, and through this article, we will take a look at four of my favorite names. More specifically, we will look at which one of these stocks is the best investment at current price levels. Also, we will evaluate some of the opportunities on the horizon for these names with a case for the most compelling value in this industry.
The four stocks we will take a look at today are AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), Vodafone Group Plc (ADR) (NASDAQ:VOD), and CenturyLink, Inc. (NYSE:CTL).
These stocks all pay a healthy dividend, and before we look at key metrics to help decide which stock offers the best opportunity for price and value at the moment, I would like to discuss the two stocks that I feel have had the most compelling developments over the past year.
Verizon Wireless joint venture
Vodafone Group Plc (ADR) (NASDAQ:VOD) is in a great position right now with news swirling that Verizon Communications Inc. (NYSE:VZ) would like to buy out its 45% ownership interest in Verizon Communications Inc. (NYSE:VZ) Wireless, their joint venture. It is possible that the deal could include a cash and stock offer, and the estimated dollar amount of this transaction is around $120 billion to $130 billion. This, in my opinion, makes Vodafone Group Plc (ADR) (NASDAQ:VOD) the most appealing stock out of these four right now if we are only looking at immediate value for spin-offs and corporate changes. As Vodafone Group Plc (ADR) (NASDAQ:VOD) is near a 52-week high currently, investors obviously are thrilled with these developments.
If Verizon Communications Inc. (NYSE:VZ) were to make a cash and stock offer to Vodafone for this stake, it offers Vodafone some opportunities. The thing I worry about for Vodafone is if it is a mostly cash offer, the lucrative venture will no longer add to its earnings. In the event that it is mostly a cash offer, the company will have to be able to reinvest this money into a venture to grow its business, or look to acquire a company to add to earnings and possibly find a new source of growth. If I were Vodafone Group Plc (ADR) (NASDAQ:VOD), I would consider making a move to acquire a large company if most of this deal was made in cash. I believe that a purchase of DIRECTV (NASDAQ:DTV), for example, could be a great fit.
To discuss the possible benefits of Vodafone exploring a buyout of DirecTV, let us look at a few things. CenturyLink, Inc. (NYSE:CTL) beat earnings estimates recently and reported great growth in its PrismTV cable subscription base. Based on this, and on seeing commercials and using PrismTV first hand, CenturyLink has done well venturing here. I believe, for Vodafone, that a purchase of DirecTV would be a great strategic fit.
It would give the company the equivalent of what PrismTV is to CenturyLink, Inc. (NYSE:CTL), but on a much larger scale. I liken it to Altria’s stake in SABMiller brewing company, as even though the companies are not in the exact same industry, they are a close fit. Altria has seen great results so far from its ownership stake in SABMiller.
The benefits to such a merger include overlapping subscribers and bundling service, while also being able to reach out to a larger customer base. DirecTV is a $36.71 billion company based on its current market cap, while Vodafone currently has a $147.49 billion market cap. I would view such an acquisition as being a bold move, and a move the company should only consider if it wants to take an aggressive move toward growth. A large cash infusion from its stake in Verizon Wireless could certainly make it more feasible from a cash standpoint.
The antitrust obstacles that AT&T Inc. (NYSE:T) encountered with its proposed acquisition of T-Mobile may not come into play if Vodafone tried to acquire DirecTV and if DirecTV is successful in its bid to acquire Sprint. Vodafone’s primary telephone market is in Europe and if it is no longer involved in Verizon Communications Inc. (NYSE:VZ) Wireless, this could provide it with an entry to the U.S. market and add further value to the company.
