As Lord John Maynard Keynes said: “Markets can remain irrational longer than you can remain solvent.”
Most of the carnage and the degree of this correction involves irrational degrees of fear, angst and focusing on "worst case scenarios." That's why we need some solid good news at the present time that will help us to see past the storm.
Keynes may have also said, "In spite of the irrational markets, you can remain solvent." One way to do that is to buy companies with rich, growing streams of revenue and business models that will continue to grow even during hard times.
These companies need to be willing to pay generous dividends, and the yield on those dividends needs to be at least 5% and dependable. Verizon (NYSE:VZ), AT&T (NYSE:T) and CenturyLink (NYSE:CTL) match that description very well, and right now at least one of them is priced to perfection.
And The Winner Is?
No, it's not Verizon, although its price below $36 still gives out a yield of 5.4%. Their current share price is at the high end of the 52-week range, and it is selling at over 16 times its current earnings.
VZ is a well-run telecom services company, and its range of service and coverage is unsurpassed in the U.S. Yet its insiders (officers and directors) haven't been buying their own shares for many months, and that's not a good sign.
AT&T is priced to yield 6% and is selling at the low end of its trading price range. It is having to play catch up with its biggest competitor, but is still only selling at 8 times current earnings.
Insiders are buying AT&T stock, and the many who did in August paid $28.48 or more for their shares, which today are priced under $28. This company knows how to make lucrative deals and to please shareholders.
Yet as desirable and powerful as VZ and T are, in my opinion the winner right now is CenturyLink.
Based on today's 52-week low price of around $31.30, and paying an annual dividend of $2.90, your dividend yield is an encouraging 9.25%.
Executive V.P. of Network Services Dennis Huber recently bought 9,000 shares at $34.94, and we can buy the shares today at almost 10% below that reasonable price.
CenturyLink is the third-largest telecommunications company in the United States. The company provides broadband, voice and wireless services to consumers and businesses across the country. It also offers advanced entertainment services under the CenturyLink Prism TV and DirecTV brands.
In addition, the company provides data, voice and managed services to business, government and wholesale customers in local, national and select international markets through its high-quality, advanced fiber-optic network and multiple data centers.
CenturyLink is recognized as a leader in the network services market by key technology industry analyst firms. CenturyLink’s customers range from Fortune 500 companies in some of the country’s largest cities to families living in rural America. Headquartered in Monroe, La., CenturyLink is an S&P 500 company and is included among the Fortune 500 list of America’s largest corporations.
This is a sector and these are companies that are the "good-news bulls" in the midst of many overpriced, under-yielding "bad-news bears." Do your own due diligence, and consider why CTL may be a good place to begin.
Remember the old "Rule of 72": If a company is yielding 9%, and if the price of the shares didn't go up at all, it would take only 8 years for your money to double. That's because when you divide 72 by the yield (9), you can figure out how fast it will take your money to double, including the compounding effect.
So remain rational while the markets are irrational, and look to high-yielding companies with irreplaceable services to preserve and grow your investment dollars.
Disclosure: I am long T, CTL.