Portugal Telecom, SGPS (ADR) (PT), BCE Inc. (USA) (BCE): A Profitable Business Partnership?

In the short run, Portugal Telecom, SGPS (ADR) (NYSE:PT) will be looking at the effects of Portugal’s recent agreements with the IMF, EU, and ECB. The other eye will be looking at a performance turnaround, as sales have stagnated and revenues have decreased since 2011. In the long haul, it has to wrestle with increasing competition, and continue improving services provided. However, amid economic difficulties in Portugal, further investments are not expected, meaning the company will not develop profitable options in the media segment.

During the last decade, revenue and net income have stagnated after an early rise. Operating margin experienced an early rise and then stagnated as well, standing today at the industry average. Additionally, debt has seen worrying hikes in the past few years, and cash flow reduced considerably. So, in all, Portugal Telecom, SGPS (ADR) (NYSE:PT) is at a crossroads.

Trading at 13.6 times its earnings, carrying a 38% discount to industry earnings, paying quarterly dividends $0.3559 equal to a 6.85% yield, and a price tag close to the 52-week low, the stock is enticing. However, Portugal Telecom, SGPS (ADR) (NYSE:PT) is expected to head towards more turbulence as the most recent dividends paid out have exceeded net income. It is recommended to hold until management addresses dividend payments and debt issues, and the Portuguese economy shows significant improving signs.

Answering the call

All three companies have managed to hold a leading position in their corresponding markets. Portugal Telecom, SGPS (ADR) (NYSE:PT) has, however, made some mistakes with respect to dividends, while Telefonica Brasil SA (ADR) (NYSE:VIV) will face obstacles around market exhaustion for the mobile segment and limited diversity in its business. BCE, however, has been responsible with dividend payments and finding profitable options to exhausting markets, and looks worthy of consideration.

Vanina Egea has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Vanina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Telecom and Media: A Profitable Business Partnership? originally appeared on Fool.com is written by Vanina Egea.

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