One of the problems with infrequent blogging is you tend to miss out on some great “I told you so” moments.
Sadly enough this is also the case when you are broke as you never quite have the funds to make the moves in investing that are truly great for your portfolio. For me, that happened recently when Vodafone just sold off its 45% ownership of Verizon Wireless for $130B. Oops. If you’ve been following this blog you know its a company I have wanted to invest in for a while (generally around the 26/share mark). Now on the back of its new found wealth and plan to buyout everything under the sun, the company stock price has jumped to the low 30s.
If you haven’t seen it in the news “The Street” had a few articles on the subject which you can check out over at thestreet.com. One of them outlines some of the gameplan Vodafone has moving forward which consists of spending about $20B to pay off its debts, then using the majority of the rest to acquire other companies. These range anywhere from a few German television groups to some Spanish telecoms.
I must say it is bitter sweet to some degree, while I love that I called it, not having had the funds to get in makes it fairly moot. What good is being right if you can’t make money off it? I will say this though, even though this company is trading around 33/share, I would still get in if you can. I fully expect them to hi the 40-42 range within a year or so.
On the flip side of this transaction however, there is just as much to discuss as well. Verizon now owns 100% of Verizon Wireless, and has claimed it intends to become a high yielding dividend stock. Good news right? Well sort of. Verizon currently trades at around the $46 mark and pays a 4.41% dividend. It’s my opinion that with the amount of debt they have recently taken on you won’t see this magic added payout for a while, and even then you may see a bump to 4.65% which may not be worth the hassle.
For me anyways, I feel I can get better value out of a company like At&T, who provides a 4.5% dividend and only trades at around ~$32/share. I don’t feel like the American telecoms have the ability to go a whole lot higher in their stock price, at least not high enough to get in and out for the few bucks you’ll make (for the record I see VZ hitting around $48.5/share and AT&T getting to about 37 ish). While its mathematically true that if both companies are paying a 4.5% dividend you’ll get more per share from Verizon, the lower cost allows you to get more shares of AT&T which will make more money in the long run.
Well this is where I stand on the telecoms for now. If you want the tl;dr version buy Vodafone ($VOD) and AT&T ($T) and if you want Verizon ($VZ) isn’t awful, although I consider it the worst option of the three. Thanks for reading and I’ll try to be back with more soon.