The Motley Fool

Which telecom stock should you own?

Australia’s telecommunication stocks have enjoyed a number of solid years of revenue and profit growth thanks to the surging number of consumers using mobile phones and high-speed internet. Some analysts have doubted the growth rates experienced in previous years will be repeated but this Fool thinks there are still some great stocks available on the market.

In the mobile industry, Telstra (ASX: TLS) is king. With over 15 million subscribers it is hard to believe the number it is still growing, but it is. With both a legendary dividend that smashes term deposits and healthy balance sheets, Telstra is definitely worth a spot on watchlists. Compared with the banks, big miners and retailers Telstra is still reasonably priced.

In contrast to Telstra’s performance over recent years, Hutchison Telecommunications Australia (ASX: HTA), (50% owner of Vodafone) has gone backwards, bleeding subscribers and cash for a number of years. Despite launching its 4G network, improving customer service and developing its existing 3G network, it might be too early to buy in.

Sitting comfortably in between Vodafone and Telstra is Optus, owned by Singapore Telecommunications (ASX: SGT). Total number of mobile subscribers sits around 9.5 million but, like Telstra and Vodafone, it claims to have the best network. It is hoping its net dual-band 4G network will draw in customers in the near future. Although it pays a solid dividend and is moderately priced, this Fool isn’t convinced it’s currently a good buy.

Instead of Optus or Vodafone, investors should be looking for growth outside the three biggest household names. M2 Telecommunications (ASX: MTU) and iiNET (ASX: IIN) have both been continuously delivering on expectations over a number of years. This morning, M2 announced gains across all earnings metrics, including boosting its NPAT 33%, dividend 33% and EPS 6%. Both companies pay solid dividends and offer growth potential.

Foolish takeaway

Internet downloads, cloud services and mobile devices are booming. These stocks (excluding Hutchison) are great companies to add into any portfolio provided they’re bought at the right price. For my money, Telstra is a great ‘core’ stock whilst M2 has produced 11 years of growth and 18 consecutive dividend increases.

iiNET, M2, SingTel and Telstra pay great dividends but they’re not our favourite income idea. Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading


Motley Fool contributor Owen Raszkiewicz owns shares in M2 Telecommunications and Telstra.

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Related Articles...

Latest posts by Owen Raszkiewicz (see all)