Telecom Argentina: Buying The 11.9% Dividend

| About: Telecom Argentina (TEO)

Telecom Argentina SA (NYSE:TEO) fell over -6% Monday on news that Morgan Stanley downgraded it from Overweight to Equal Weight. This presents an excellent buying opportunity.

Here's what TEO has going for it:

  • P/E: 6.22
  • PP/E: 4.97
  • Forward Annual Dividend & Yield: $2.21 (11.90%)

While TEO's growth prospects are not astounding (a modest +13.8% EPS growth rate for 2012 and +9% 5-year EPS growth rate), I believe it is undervalued, if not very fairly valued--at least for the next month. Technically, it has had strong support just above $17 mark, since October 2011, that has been tested several times.

TEO's yearly ex-dividend date is coming up -- that is, the last date you can purchase the stock and still collect a dividend. Last year the ex-dividend date was April 14th; that dividend was paid on April 26th, 2011.

So, even if the stock doesn't make a big move between now and then, you can still collect an 11.90% dividend and sell right after. Assuming you pick up 100 shares of TEO at $17.50, at $2.21/share, the dividend alone will bring in $221. That's a +12.6% gain. Not bad for sitting on some solid shares for a month.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TEO over the next 72 hours.

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