Investing Topics: Telecom Stocks

Fourth quarter and full-year earnings normally dominate the news this time of year. And rightly so: They’re what ultimately shape shareholder returns.

Verizon Communications (NYSE: VZ) posted solid fourth-quarter earnings yesterday, demonstrating once again why the stock is a foundational holding for income-seeking investors.

Wall Street’s January ritual is to roll out “new” investment strategies. This year, fund manager Bill Gross has proclaimed the end of a 30-year bull market for bonds. So it’s no great surprise income advisors further down the food chain are pushing investors to adjust portfolios for higher interest rates.

Seek stocks of healthy and growing companies whose prospects exceed investor expectations. Then build a diversified and balanced mix you can hold long-term, to enjoy the rising cash flow and share price appreciation that growing dividends provide over time.

The Dow Jones Utility Average has lost ground in 17 of the 30 Januarys since 1984. Happily, only 5 of those declines led to a losing year. And in 13 winning Januarys, the average total return was 24.8 percent—the only losing year 1987.

The Conrad’s Utility Investor Portfolios officially launched on July 31, 2013. Since that time, the Dow Jones Utility Average is off -2.3 percent, including dividends paid.

My Aggressive Income Portfolio is up by 9.3 percent, while the Conservative Income Portfolio has returned 3.3 percent.

These utilities could be due for a dividend cut. 

No group of dividend-paying stocks has been more profitably shorted the past few years than high yield telecoms. Short sellers make their money when stock prices fall. And sector companies have not only cut dividends eight times since 2009, but we’ve seen a pair of bankruptcies as well.

Only three of the 28 current Conrad’s Utility Investor Portfolio recommendations have yet to report calendar third quarter earnings. That’s plenty of data to identify relevant sector trends, while we assess the health of individual companies.

Real industry trends don’t spontaneously occur. They’re forged on the ground by what companies are actually doing. And you spot them by focusing on individual companies’ results, and aggregating your findings.