Telecommunications: slow but profitable growth

Article Excerpt

Telecommunications form an integral part of the economic infrastructure. Strict licensing standards and high capital requirements result in considerable barriers to entry. Despite slow growth, many of the major telecommunication companies (see AT&T box this page) have strong cash flow, attractive p/e’s and rising dividends. Nevertheless, telecom stocks have lagged the market over the past year as rising interest rates prompt investors to shift to more cyclical companies. Below we take a closer look at U.S. telecommunications ETFs: VANGUARD TELECOMMUNICATION SERVICES ETF $88 (New York symbol VOX; TSINetwork ETF Rating: Aggressive; Market cap: $998.9 million) invests in companies involved in the telecommunications services industry. The fund holds a portfolio of 24 U.S. stocks. The top 10 account for a whopping 71% of the portfolio, with heavy weightings for both Verizon (23.6%) and AT&T (22.1%). They’re followed by CenturyLink (5.3%), T-Mobile (4.3%), Zayo Group (3.1%), Vonage (3.0%), Iridium Communications (2.6%), Orbcom (2.3%), and Sprint (2.3%). The ETF started up in September 2004 and…

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