The Slow Burn of Mega Telecom StocksOver the past year, Verizon and AT&T, two of the largest telecommunications giants, have seen their stock prices go lower... and lower... and lower.
This decline has been notable, catching the attention of not only markets in general, but the telecom sector as a whole and bellwether dividend investors.
The downward trend is especially notable when you consider the fundamental nature of what these businesses provide: connectivity. This, in a way, is a required resource at this point in time, like energy.
So what's happening to two this stocks and why are they on my watchlist? Why am I writing about them now?
First, let's me say that their dividend yield has my attention. Verizon and AT&T have maintained high dividend yields, now exceeding 6% and in some cases going about 7%. This is rather tasty looking. I do not have a position, at this time, but more research is surely warranted. While the yield is tempting, I must figure out how sustainable it is.
High interest rates and high debt rates do offer a tight outlook to Verizon and AT&T. Additionally, the competitive landscape in the telecommunications sector has forced both companies to spend heavily on marketing and promotional activities to retain and grow their customer base. The issue of high debt is compounded by the environment of rising interest rates, which increases the cost of servicing this debt. This combination of high debt levels and increasing interest costs squeezes profitability and can dampen investor sentiment, contributing to the downward pressure on stock prices.
As this post nears its ends, here are my key takeaways for readers:
1. Telecom sector is down, badly.
2. There might be opportunity if you look deep enough.
3. Dividend yield is one thing I'll be researching for further for more income.
4. High debt levels are worry for stocks like AT&T and Verizon, they must articulate a plan in this regard.
5. If anyone in the comments below want to share other dividend stocks with me (over 6% please, let me know)
Thanks for reading!