This high dividend stock’s wireless focus helps it profit from rising smartphone use

Smartphones have become increasingly popular in recent years. Aside from functioning as mobile phones, these devices have many computer-like functions, including Internet access and email.

There are a couple of ways for investors to profit from rising use of smartphones. The obvious approach is to buy shares of companies that make these devices. Apple and Research in Motion are the most dominant smartphone makers. However, other firms, such as Motorola, Palm and Garmin, have introduced new smartphones in recent months, as well.

Another way to profit from rising use of smartphones and other wireless devices is by holding stocks of wireless carriers. Many of these firms have more revenue sources than smartphone makers. Aside from wireless operations, they may provide traditional phone, Internet and television services. This diversity lowers their reliance on a single device. In addition, they get continuing revenue from their customers. This cuts their risk.

This high dividend stock’s smartphone subscriptions are on the rise

Because of their diverse and steady revenue streams, wireless carriers also tend to be high dividend stocks.

For example, in the current issue of Wall Street Stock Forecaster, our newsletter that focuses on the U.S. stock markets, we update our buy/sell/hold advice on Verizon Communications Inc. (symbol VZ on New York). Verizon pays a quarterly dividend of $0.48, for a high 6.4% annual yield. Plus, the company saw a big jump in smartphone subscriptions in its latest quarter.

Verizon owns 55% of Verizon Wireless, which is the largest wireless provider in the U.S.; U.K.-based Vodafone plc owns the other 45%. This business has 92.1 million customers in 50 states, and accounts for 60% of Verizon’s revenue.

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The remaining 40% comes from the high dividend stock’s wireline division, which sells local and long-distance telephone service to over 27 million customers in 28 states.

Verizon added 1.4 million new wireless customers in the latest quarter. Moreover, 20% of its wireless customers now use smartphones. That’s up from 15% at the end of 2009. Rising smartphone use is good news for Verizon, because it can charge more for Internet downloads than regular phone calls.

New deal with Frontier will benefit Verizon’s wireless services

In the past few years, Verizon has shifted its focus toward its wireless and high-speed Internet businesses. As part of this plan, it has spun off (or handed out shares of) many of its less-profitable operations.

For example, it recently spun off some of its traditional phone operations to Frontier Communications. In return, Verizon shareholders received 0.24 shares of Frontier for each Verizon share they held. They now own 68% of Frontier. Verizon investors only become liable for capital-gains taxes on their Frontier shares when they sell.

New services further diversify this high dividend stock’s revenue streams — and help cut its risk

The company is also seeing strong demand for its FiOS (Fibre-Optic Service) Internet service. FiOS has increased the speed of Verizon’s Internet service, and let it expand its FiOS TV television service.

These improvements helped Verizon add 196,000 new FiOS customers in the quarter. It now has 3.8 million FiOS Internet users (up 23.8% from a year earlier), and 3.2 million FiOS TV subscribers (up 27.3%).

You can get our full analysis, including clear buy/sell/hold advice, on Verizon and 18 other U.S. stocks in the latest Wall Street Stock Forecaster. What’s more, you can get this issue absolutely free when you subscribe today. Click here to learn how.


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