Given my cautious view of the market after months of a significant equity rally, I am taking some of my profits I have made in the bounce back of cyclical and commodity stocks and moving those funds into defensive sectors with low valuations and rock solid dividend streams.
One area I like is foreign telecom stocks that pay over 5% dividends. My core positions in this area, which I have articulated before, are Vodafone (NASDAQ:VOD) and Telefonica (NYSE:TEF). Two stocks I am currently looking to add to my telecom position on the next dip in the market are below. They have solid yields, low valuations and look like they have bottomed.
Mobile TeleSystems (NYSE:MBT)
Business description from Yahoo Finance (see here):
Mobile TeleSystems OJSC, together with its subsidiaries, provides telecommunications services primarily in the Russian Federation, Ukraine, Uzbekistan, Turkmenistan, Armenia, and Belarus. The company provides a range of mobile and fixed line voice and data telecommunications services, including transmission, broadband, pay-TV, and various value-added services; and sells equipment and accessories.
4 reasons MBT is a solid value at $17 a share:
- The stock looks like it has it bottomed and has increasing technical strength, recently crossing its 100 and 200 day moving average (see chart, click to enlarge images):
- It provides a robust 6.2% yield and is priced at just 10 times forward earnings.
- The mean analysts' price target on MBT is just under $22 and has a very attractive five year projected PEG (1.1) for such a high yielding stock.
- The stock is selling for less than 5 times operating cash flow and the company is selling at the bottom of its historical valuation based on price to sales. Volume growth in mobile handsets is also back to pre-2008 crisis levels in Russia.
SK Telecom (NYSE:SKM)
Business Description from Yahoo Finance (see here):
SK Telecom Co., Ltd. provides wireless telecommunications services using code division multiple access (OTCPK:CDMA) and wide-band CDMA technologies. It offers cellular voice services, such as wireless voice transmission services; and wireless global roaming services.
4 reasons SKM is a buy at under $14 a share:
- The stock is selling at the bottom of its five year valuation based on P/E, P/B and P/S. It also looks like it is bottoming (see chart):
- The median analysts' price target on SKM is just over $18 and it yields a solid 5.5%.
- The stock is selling at 86% of book value and a five year projected PEG of under 1 (.94).
- SKM is selling at 3 times operating cash flow and has a forward PE of just over 7.