Vodafone Group Plc (ADR) (VOD), China Mobile Ltd. (ADR) (CHL): These Telecoms Provide Income, Stability, and a Little Growth

Conclusion: a Comparison between the three

Free Cash Flow is an important metric for telecoms because it can be readily converted into dividends. Of the three telecoms, only Vodafone has not been able to grow Free Cash Flow since 2009, (these numbers do not include their stake in Verizon, which would likely make Vodafone Group Plc (ADR) (NASDAQ:VOD)’s Free Cash Flow numbers positive). Both China Mobile Ltd. (ADR) (NYSE:CHL) and AT&T Inc. (NYSE:T) have grown cash flow steadily.

Looking at debt relative to Free Cash Flow, we see that China Mobile has a clear advantage over the other two. Despite the lower dividend yield, a low P/E ratio and clean balance sheet make China Mobile Ltd. (ADR) (NYSE:CHL) a conservative choice. While AT&T Inc. (NYSE:T) may have more debt, its higher yield and steady growth will deliver predictable income and provide some protection against possibly rising rates. Dividend investors should consider all three companies and choose the one which best suits their needs.

Sources:

All price charts by stockcharts.com

“Free Cash Flow,” and “Debt/Free Cash Flow” charts by author, data by Morningstar

Casey Hoerth is long Vodafone and China Mobile. The Motley Fool recommends Vodafone. The Motley Fool owns shares of China Mobile.

The article These 3 Telecoms Provide Income, Stability, and a Little Growth originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.