Vodafone Group PLC (VOD)

Doesn’t own this, because on a valuation basis it is quite rich, especially looking at their future price to earnings of 42X. When a company is trading at such a high multiple, it is often priced for perfection, and there is not much room for anything other than that. He would prefer Canadian telcos where there is not a whole lot of competition.

It has done so well because there is talk that Liberty Global is thinking about talking about a merger. 6% yield on the ADR. 5% dividend on the UK shares. He thinks the merger would make a lot of sense.

Are the yields of 4.5%-5.5% sustainable on BCE (BCE-T), Verizon (VZ-N) and Vodafone (VOD-Q)? Most of the dividends are sustainable and he thinks they can afford to grow their dividends. BCE trades at a very high multiple at almost 16X earnings. Why people are worried about BCE is that it is not only a telephone company, but also a communications company. Verizon and Vodafone gives you much more of a pure play.

The European market has changed in terms of the outlook for growth for telecom companies. This company goes around the world buying small operations, grows and then sells them off. Good management. Yield of 3.12%.

Once you get outside of a key market such as Germany, this company is often the #3 or #4 player, which can be a very, very tough spot for a telco. Also, he is looking for quality in the network, and this company is really weak in that department. Their ability to handle a ramp in data demand, both in mobile and at home, is weak. (See Top Picks.)

Thinks there is some structural upside in this. Europe is going to see its telecoms grow revenues, probably for the 1^st time in at least 10 years, compared to Canada, where it is a cost savings story which is driving earnings. They have a strategy of going around the world and picking up assets, incubating them, and then selling them for a profit in the future.

The attraction now is that in Europe telcos are starting to be able to raise their rates. African and Asian businesses are getting better. Earnings growth will be more than for domestic telcos.

Has a great yield, but it is all about growth going forward. They are positioned in some of the emerging markets, but the difficulty with emerging markets is that margins are pretty skinny. If you don’t own, don’t be in a rush to buy. If you’re buying it for yield, keep a stop underneath it in case the yield play goes against you.

Sell Bell (BCE-T) to buy Vodafone (VOD-Q)? Last year they unloaded the Verizon wireless position and paid a huge (50%) special dividend. Balance sheet as strong. Longer-term, this is a good story. Thinks the regulators in Europe have come to the situation where they need to promote growth in the sector, to cause fibre build out. Because of this, you may see better economics going forward. 3.2% dividend yield.

Sold their US shares of Verizon back to Verizon. The stock went through some pressures the early part of the year. More recently he has seen some instability. Very cheap. They are investing in the network. Have a great balance sheet. Thinks they are starting to pull ahead. Feels the stock works to the mid-$40’s or higher.

Verizon (VZ-N) or Vodafone (VOD-Q)? If he had to choose, it would be Verizon.

Has options and this is in the trading range of $32-$34 and has an extremely high yield of 7.5%. Hold or fold? Thinks the dividend will come down more towards 5%. At the moment, it is being priced ex the special dividend last year. He likes this one long-term.

This was a massive organization with businesses all over the world. They got rid of non-core assets. This is good. It rose and then pulled back down when people wanted a payout based on the Verizon sale. Thinks there will be a consolidation in the European telecom sector and VOD-N should benefit from it. It has a nice yield as well.

Has owned this in the past, but sold it into the Verizon deal. He doesn’t see enough growth in this for him. 7.8% dividend yield.

(Top Pick Sep 4/13, Up 0.35%) Chose it because of their massive selloff of Verizon.