Verizon Communications (VZ)

The Canadian communications sector still looks over valued, that is why he is looking to this US holding. The company is making a huge bet on being the 5G provider. To get a 12 times PE and good yield, he sees this as a good bet. Yield 4.5%. (Analysts’ price target is $56.46)

More of a wireless than a telco company. Growth has really slowed down in this sector, yet cell phones remain an essential business. He likes Verizon and it's a little pricey now, but good long-term. Pays a nice dividend.

It is a large holding in a number of his funds. It has a nice dividend and the service revenues are good. They are getting better. They have the best margins in the space and have the best opportunities for 5G because they can roll out faster. He trusts them in terms of allocating capital well. They are more profitable than their peers so they can better survive any price wars.

Telecoms should be owned later when the economy retracts. This stock has been sideways, though has a decent growth rate. He may buy this in a few years. But it's okay to hold this purely for the dividend, but don't expect share price growth.

Whoever owns it, say they like if for the dividend. He would caution investors about wanting to own this merely for the dividend. The stock has done nothing and he thinks you would do better with a lower yield stock, but with better growth potential. He is not interested in this space at all as he thinks the dividend could be under pressure. (Analysts’ price target is $56)

VOD-Q vs. VZ-N. He prefers Euro telcos to Canadian. They have room in Europe to add to the bill per subscriber.

They sold their wireline business a few years ago and bought out the minority interest of Vodafone, putting all their eggs in one basket which did not pay off. Margins on wireless aren't as rich anymore. Telecoms don't do well during rising interest rates. Look elsewhere.

AT&T vs. Verizon? Verizon is the better-quality company. Both offer good dividends, but Verizon has less debt and a better network. If you want dividend income, go with AT&T. If you want growth, go with Verizon.

Their dividend has eroded over past years because they've moved away from the high-margin wire line business (that they sold) and put all their eggs into the wireless basket which now has less-attractive margins. Telecoms historically don't do well in times of rising interest rates.

This is an S&P100 company and he holds this in his own RRSP and would buy more right here. Internet net neutrality rulings could be something to watch going forward. He is getting frustrated with it as well. Yield 4.8%.

What is the long term outlook for this as technology continues to go wireless? Telecommunications have been a serial underperformer. Wireless prices have come down. With the dividend payout ratios, he wonders how they can continue to exist. He has no investments in this sector. Yield 4.9%.

It is a newer name for him. The competitive dynamics have shifted and this one has done well. There has been a move to investment in 5G and they have been able to do it faster than the competition over the next 24 months. It has a great dividend. Yield 4.7%.

A highly competitive industry. It has been sideways all last year. He thinks it might go lower because of the rate picture. It is a bond proxy, which he thinks you should stay away from. He would steer clear.

What is facing a lot of the telecommunication companies is the same thing that AT&T has decided to do, the need to own the content as well as the distribution. This company has been kind of left out there with digital content, but not TVs or movies. This is the problem they face, especially if the AT&T deal goes through.

He is staying away from investing too heavily in staples and telecoms, but the valuation on this is very compelling. Trading at 7X EBITDA, a very cheap multiple and a 5% dividend yield. They’ve spent the last few years spending a significant amount of capital on building out their 5G network. We are now hitting the inflection point where in 2018 they are going to start to harvest some of the cash flow back. Most of the heavy lifting has been done on capital spending.