Looking at the market over the last month, I have to believe that people are looking for a safe haven to put their money - other than under the mattress. I have to admit there are rough waters in the Atlantic Ocean between Europe and the United States. In a time like this, an investor needs stability in price and a good dividend to stay competitive in the market.
I think there are four stocks right now that are a good place to put your money and let your money continue to work for you even when the market has been going down. I am talking about investing in the four major telecommunication companies that have held their value and also offer a very nice dividend.
I think one of the safest places for your money today is with telecommunication companies such as Verizon (VZ), Vodafone (VOD), AT&T (T) and Frontier (FTR). Sure there are other telecommunications but British Telecom (BT) and Sprint Nextel (S) do not offer the protection you seek as investor.
Stability in price
First, I want to look at price fluctuations that may give us an edge on determining the downside risk to your investment. Surprisingly, Vodafone has been in a price range of $18-$28 over the past two years, but more importantly the stock has traded in the range of $24-$28 for more than 18 months, and the last time the stock went under $24 per share was in August 2010. In addition, the average price for Vodafone over the last five years has been $26. Verizon has been trading in the range of $26-$41 over the past two years and has posted a very nice gain during this time frame.
The last time Verizon even traded under $30 was in August 2010, which was a tumultuous month for the market in general. Verizon's average price for the last five years has been $34 and currently Verizon is close to its 52-week high of almost $42. AT&T has also been stable in price ranging from $24-$34 per share since July 2010 and it has also experienced a nice increase in price since April 2012. Currently, AT&T is around $34 per share and has broken into higher price territory not seen by investors since June 2008.
Frontier Communications, on the other hand, has not been as stable as the previous three for the last two years. Frontier has been in a range of trading from $3-$10 per share but at this moment it is hovering just above its 52-week low. The average price for the last five years has been around $8 per share. Unfortunately for Frontier, it has been a slow decline over the past five years, but there is optimism for this stock going forward.
Overall, price stability has been relatively stable for Vodafone, AT&T, and Verizon, as well as upside for Frontier in the future. I think this is what an investor needs right now, price stability.
Dividend yields are healthy
Usually, when a stock has price stability, there is a dividend attached to the stock. I know dividend stocks are not sexy to many investors looking for that quick return. The dividend investors that have invested in telecommunications companies like Verizon, Vodafone, AT&T as well as Frontier have been receiving an increasing year-over-year dividend that has supplied investors with an added incentive to buy and hold its stock.
AT&T's dividend has steadily increased by 10% since 2008 from $1.60 to its current level which is predicted to offer a dividend of $1.76 per share for 2012. At the current price of $34 the dividend yield for AT&T is just above 5% and the stock is on an upward movement. Verizon has constructed a higher dividend as well over the past four years and is offering a dividend that is 12% better than in 2008.
Verizon's dividend is expected to reach $2 per share in 2012 and with the stock on the upswing in price as of late, there appears nothing can hamper the future growth of dividends. As of now, with Verizon at $41 per share, its dividend yield it is close to the 5% mark. Vodafone has had an intriguing dividend story for the past three years with a range of $1.54-$1.99 and there have been fluctuations due to partnerships and business in Europe. At the current price, Vodafone is offering a dividend yield greater than 7% due partly because in January 2012 Vodafone announced a special dividend of $0.62 per share.
The special dividend is funded in part by Verizon Wireless, in which Vodafone owns a 45% stake. Vodafone returned an additional $3.5 billion in cash to stock holders. But if an investor wanted part of the special dividend, they needed to have held a position in Vodafone by June 6. Lastly, Frontier Communications offers an attractive 11% dividend yield with the stock price at or around new 52-week lows. The dividend is down some 50% from 2011, but a flurry of insider buying in 2012 has bolstered dividend confidence. I know $0.40 is not much money, but a person can buy a lot of shares at the current price just above $3, although investors needed to act before June 8.
One thing to watch regarding AT&T and Verizon stock is Virgin Mobil's push to offer low priced iPhone plans. The comparatively better deals could eat into the giant's profits. However, the size of the two giants network's should keep Virgin Mobil a minimal threat.
I would encourage an investor to obtain a position in Verizon, Vodafone, Frontier Communications and AT&T, as a defensive money generating alternative, instead of just riding the storm out. Investors must be ready and steady because some of these stocks are reaching 52-week highs as the shareholder date of record is approaching fast. An investor should buy in now and wait out the pessimism that exists in the market.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.