Verizon Communications (VZ)

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.

They have a strong economic mote. They have a stable dividend history. The infrastructure cost in the US per capita would be less than in Canada. But there are not that many players in the states, although the competitive pressure would be significant.

Many people under 25 are disconnecting from a bunch of different devices, including cable. Streaming as much is they can for free and finding ways to take advantage of wireless providers. This company is a huge free cash generator. Competing in the television environment. It’s basically a no-growth, free cash flow, trying to figure out ways to grow. Has a secure dividend. Expects the whole business to shrink. Dividend yield of 4.95%.

VZ-N vs. VOD-Q. He does not follow the US market. VZ-N would be the best in terms of the US and VOD-N would be the best internationally. Owning both would be a good strategy.

Analysts generally have it as a hold. Telecom is cheap to him. They have been underperforming for almost a year. IYZ-N reflects the telecom sector and he has been buying it. He likes it here and is in an accumulation here. He prefers the ETF to one company. He does not know if VZ-N will be a winner over the boarder sector.

The US are down to 4 telecoms and were out of favour as they were bond proxies. You are getting 5% yield but not price appreciation. It is getting harder to get new subscribers. It is a safety stock. People buy it when they want income.

One of the top 10 most widely held stocks in America. The average dividend is over 4%, and he would guess people like it because of its huge dividend. Over the last 10 years, the average annualized growth on the 10 most widely held stocks was 2.6%, not very good in a market which has done considerably better than that. Dividend growth is more important than the average dividend yield, so if a company hasn’t raised the dividend in 10 years, that is generally not a stock you want to buy.

(Market Call Minute.) These telephone stocks just go sideways. You collect the dividend. If you buy it low and sell it high when ever you pull up the chart, you are good.

An intensely competitive industry. You have T-Mobile (TMUS-Q) really kicking up with strong competition. Unlimited data has greatly reduced churn, and there are fewer pricing levers and margin levers to pull.

The dividends are being covered now. There is a lot of change in the sector. If you want to take a chance on them working through it, okay, but he is not. He does not participate in the sector.

Like Bell Canada (BC-T), this pays a big dividend. It has been a little weak, but did report slightly stronger than expected earnings. The outlook is sort of flattish. You own this for its dividend. If you are a Canadian investor, you might as well own Bell, and get the dividend tax credit, not pay double taxation by paying US taxes.

This is one he would be buying here. You don’t have to worry about the dividend. A lot of the pressure was about them buying the Yahoo position. The other part of this company that is much more difficult is that they are one of the ones that really don’t have that Time Warner aspect of it where everybody wants them to buy something to fill that gap in their portfolio.

The dividend yield is great, and that usually forms half the return you should expect to earn. Telcos are going through radical and rampant evolution and change. The exceptionally disruptive players in the US is “creaming pricing”, and a lot of money needs to be invested to remain competitive. Cell phone penetration is very high. There is a lot of technological disruption. As long as rates stay low, this is okay, but it is not a fast-growing area.

They are having troubles like AT&T. TMUS-Q has unlimited usage and that has been taking a lot of customers away. Right now it is a race to the bottom. He would prefer Canadian telecom companies.

Had a bad quarter. Adjusted EPS was $.95, compared to $1.06 a year ago. This was really because of competition. US has now become Europe, because everybody is fighting over that last foot in the door and trying to come up with products that people are going to take, as well as spend money on. The dividend yield is high. The dividend increase was not great. You are almost getting a bond -like yield, so you are somewhat better to own the bonds than the stock, because you rate higher in the corporate chain, but you are getting the same kind of payout. He has been buying their bonds as opposed to their stocks.