Arie Goren's  Instablog

I have searched for profitable companies that pay rich dividends and that raise their payouts significantly each year among the stocks in the telecom services industry. Companies that regularly increase dividends are generally more stable. Increasing dividends is the assurance that dividend income retains its purchasing power over time.

I also looked for companies that are in short-term uptrend, in mid-term uptrend and in long-term uptrend. Stocks in an uptrend are performing well and are in a buying mode.

I have elaborated a screening method, which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.

The screen's formula requires all stocks to comply with all following demands:

1. Dividend yield is greater than 4.4%.
2. The annual rate of dividend growth over the past ten years was greater than 3%.
3. The annual rate of dividend growth over the past five years was greater than 2%.
4. Forward P/E is less than 15.
5. Stock price is above 20-day simple moving average (short-term uptrend).
6. Stock price is above 50-day simple moving average (mid-term uptrend).
7. Stock price is above 200-day simple moving average (long-term uptrend).

After running this screen on March 04, 2013, before the market open, I discovered the following three stocks:

(click to enlarge)

(click to enlarge)

(click to enlarge)

BCE, Inc. (BCE)

BCE Inc. provides wire line, wireless, Internet, and television services to residential, business, and wholesale customers primarily in Canada.

BCE, Inc. has a very low trailing P/E of 13.74 and a low forward P/E of 14.58. The forward annual dividend yield is very high at 4.99% and the payout ratio is at 66%. The annual rate of dividend growth over the past five years was very high at 9.4% and over the past ten years was quite high at 6.6%.

The BCE stock price is 1.95% above its 20-day simple moving average, 3.42% above its 50-day simple moving average and 7.33% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

On February 04, BCE Inc. reported its fourth-quarter and full-year 2012 financial results, which missed EPS expectations by $0.01 and were in-line on revenues. In the report, the company announced a $0.06 per share increase in its annual common share dividend to $2.33. The company also said:

Today's dividend announcement represents BCE's ninth increase to the annual common share dividend, representing a 60% overall increase since the fourth quarter of 2008. The BCE annual common share dividend will increase from $2.27 to $2.33 per share effective with BCE's Q1 2013 dividend, payable on April 15, 2013 to shareholders of record at the close of business on March 15, 2013. Together with the earlier $0.10 per share increase announced on August 8, 2012, BCE's annual common share dividend increase for 2013 is up 16 cents or 7.4%. The higher dividend for 2013 is supported by substantial free cash flow generation and our positive business outlook for 2013.

The cheap valuation metrics, the solid fourth-quarter 2012 results, the rich dividend, the fact that the stock is in an uptrend, and the fact that the company consistently raises dividend payments are all factors that make BCE stock quite attractive.

(click to enlarge)

Chart: finviz.com

AT&T, Inc. (T)

AT&T Inc. provides telecommunications services to consumers, businesses, and other providers in the United States and internationally. The company operates in three segments: Wireless, Wireline, and Other.

AT&T has a trailing P/E of 29.52 and a low forward P/E of 13.34. The forward annual dividend yield is very high at 5.00%, and the payout ratio is very high at 141%. The annual rate of dividend growth over the past five years was at 2.4% and over the past ten years was quite high at 5.2%.

The stock price is 1.66% above its 20-day simple moving average, 4.39% above its 50-day simple moving average and 3.80% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

On January 24, AT&T reported its results for the fourth quarter and full year of 2012, which missed EPS expectations by $0.01 and beat slightly on revenues. In the report, Randall Stephenson, AT&T chairman and chief executive officer, said:

We had an excellent 2012. We grew revenues, increased adjusted earnings per share by 8.5 percent and generated cash from operations at record levels. We used this cash to invest aggressively in the future of our business and returned $23 billion to shareowners through dividends and share repurchases. Looking ahead, our key growth platforms - mobile data, U-verse and strategic business services - all have good momentum with a lot of headroom. We're off to a strong start executing Project VIP, our plan to expand our high-growth platforms to millions more customers, and our 4G LTE network deployment is ahead of schedule, delivering outstanding performance.

The rich dividend, the long history of steadily increasing dividend, the good 4Q financial results and the fact that the stock is in an uptrend, make AT&T stock quite attractive.

T Dividend data by YCharts

T Dividend Yield data by YCharts

(click to enlarge)

Chart: finviz.com

Verizon Communications Inc. (VZ)

Verizon Communications Inc., through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses, and governmental agencies worldwide.

Verizon has a low forward P/E of 14.88. The price to free cash flow for the trailing 12 months is at 21.73, and the price-to-sales ratio is at 1.15. The forward annual dividend yield is quite high at 4.41%, and the payout ratio is at 650%. The annual rate of dividend growth over the past five years was at 3.7% and over the past ten years was at 3.0%.

The stock price is 4.11% above its 20-day simple moving average, 6.78% above its 50-day simple moving average and 8.28% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

On January 22, Verizon reported its results for the fourth quarter and full year of 2012, which missed EPS expectations by $0.12 and met expectations on revenues. In the report, the company said:

Verizon Communications Inc. reported strong customer and revenue growth in Verizon Wireless and Verizon FiOS services in fourth-quarter 2012 -- positioning the company well for 2013. Verizon Wireless reported record-setting customer additions in the quarter, while Verizon FiOS customer additions were higher in fourth-quarter 2012 than in the prior two quarters, despite the impact of Superstorm Sandy.

Also in the report, Lowell McAdam, Verizon chairman and CEO said:

Verizon seized growth opportunities in the fourth quarter to cap a year of solid progress across the entire business. We delivered a total return of 13.2 percent to shareholders in 2012, and we enter 2013 ready to accelerate the momentum we've achieved and create significant shareholder value in the years to come.

The rich dividend, the long history of steadily increasing dividend, the solid 4Q financial results and the fact that the stock is in an uptrend are all factors that make VZ stock quite attractive.

VZ Dividend data by YCharts

VZ Dividend Yield data by YCharts

(click to enlarge)

Chart: finviz.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.