These Top-3 Communications Stocks Pay High Dividends at Value Prices
The communications services sector can offer value investors and income seekers some intriguing options.
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The communication services sector has a lot to offer investors, particularly those looking for higher investment income.
Many communication services stocks generate strong profits and cash flow, which allow them to pay high dividend yields to shareholders. And, the major communication services stocks broadly have lower valuations than many other market sectors, making them appealing for value investors as well.
This article will discuss three quality dividend stocks from the communication services sector.
1. Verizon Communications (VZ)
Verizon VZ is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers about 300 million people and 98% of the U.S.
On October 22, 2024, Verizon reported third quarter results for the period ending September 30, 2024. For the quarter, revenue declined 0.1% to $33.3 billion, which missed estimates by $120 million. Adjusted earnings-per-share of $1.19 compared unfavorably to $1.22 in the prior year, but this was $0.01 more than anticipated.
For the quarter, Verizon had postpaid phone net additions of 239,000, which was much better than loss of 51,000 that the company had in the same quarter a year ago. Retail postpaid net additions totaled 349,000. Wireless retail postpaid phone churn rate remains low at 0.89%. Wireless revenue grew 2.7% to $19.8 billion while the Consumer segment increased 0.4% to $25.4 billion. Broadband totaled 389,000 net new customers during the period, the ninth consecutive quarter of at least 375,000 net adds.
One of Verizon’s key competitive advantages is that is often considered the best wireless carrier in the U.S. This is evidenced by the company’s wireless net additions and very low churn rate. This reliable service allows Verizon to maintain its customer base as well as give the company an opportunity to move customers to higher-priced plans. Verizon’s 5G service coverage area gives it an advantage over other carriers.
Free cash flow totaled $14.5 billion for the first half of the year, compared to $14.6 billion last year. Verizon reaffirmed its prior guidance for 2024 as well. The company continues to expect wireless service revenue to grow 2% to 3.5% and adjusted earnings per share in a range of $4.50 to $4.70.
On September 14, 2024, Verizon announced that it was increasing its quarterly dividend 1.9% to $0.6775 for the November 1, 2024 payment, extending the company’s dividend growth streak to 20 consecutive years. VZ stock currently yields 6.1%.
2. The Interpublic Group of Companies (IPG)
The Interpublic Group of Companies, Inc. IPG provides advertising and marketing services worldwide. Its operations are well arrayed among consumer advertising, digital marketing, communications planning, media buying and data management services. The company dates back to 1902.
On October 22, 2024, Interpublic reported its Q3 results for the period ending September 30, 2024. For the period, net revenues came in at $2.24 billion, down 2.9% compared to last year. This was derived from a negative 0.5% currency translation effect and a negative impact of 2.4% from dispositions, offset by organic growth of 1.0%.
The company saw solid contributions to growth from media services, sports marketing, data management and public relations.
Adjusted EPS was $0.70, flat compared to last year. Year to date, the company repurchased $230.1 million worth of stock, which slightly aided EPS.
Looking ahead, management sees a strong new business pipeline, for both Q4 activity and longer-term AOR (agency of record — i.e., larger and more stable than project-based work) opportunities. For fiscal 2024, they still expect organic revenue growth of 1%.
Over the past decade, IPG has grown its EPS at a CAGR of 10.8%, driven by a series of strategic shifts, acquisitions and its ability to adapt to an evolving advertising landscape. To reflect the international segment’s strong growth, the ongoing margin expansion and the ongoing, substantial share buybacks, we retain our EPS growth estimates at 7%. Embedding digital elements across the portfolio and adding a layer of data and tech to its offerings should also contribute positively to earnings.
The company’s payout ratio has increased over the past decade as DPS growth has outpaced earnings growth. The dividend remains well-covered. IPG currently yields 4.3%.
3. Comcast Corp. (CMCSA)
Comcast CMCSA is a media, entertainment and communications company. As of Q1 2023, Comcast began reporting in two key business segments: Connectivity & Platforms (Residential Connectivity & Platforms and Business Services Connectivity), and Content & Experiences (Media, Studios, Theme Parks).
Comcast reported its Q3 2024 results on October 31, 2024. For the quarter, the company’s revenue rose 6.5% to $32.1 billion year over year. Adjusted EBITDA (a cash flow proxy) was down 2.3% to $9.7 billion. However, it was able to increase adjusted earnings-per-share (EPS) by 3.3% to $1.12. And Comcast generated free cash flow (FCF) of $3.4 billion.
The Connectivity & Platforms segment’s revenues were down 0.4% to $20.3 billion. The segment experienced adjusted EBITDA growing marginally by 0.7% to $8.3 billion, helped by margins expansion of 0.5% to 40.9%. The Content & Experiences segment saw revenue grow 19% to $12.6 billion, while its adjusted EBITDA fell 8.7% to $1.8 billion. Within this segment, Media saw a 36% jump in revenue to $8.2 billion.
This revenue rose 5% to $6.3 billion, excluding impacts from the Olympics. This segment can also experience lumpy results from the Studios and Theme Parks operations. This quarter, Studios saw a 12% jump in revenue to $2.8 billion and a 9% increase in adjusted EBITDA to $468 million, helped by the release of "Despicable Me 4" which grossed nearly $1 billion in the worldwide box office.
Comcast has had 16 consecutive years of dividend increases through two recessions. Its 15-year compounded dividend growth rate was 18%. This fast dividend growth was made possible through solid earnings growth and the firm’s safe dividend payout ratio. Its dividend is well-covered by earnings and cash flows. Comcast is one of the largest players in the entertainment industry.
At the time of publication, Ciura had no positions in any securities mentioned.