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If you are looking to invest in the communications services sector, you must know that it comprises two types of stocks.
The first ones are stocks belonging to telecommunications companies that provide services and equipment to transfer information through TV, internet, wireless, etc.
The second type of stock belongs to information technology companies. These companies use the latest technology, computer hardware and software to aid people and companies stay connected.
There is currently no broad sector that has gone through more economic growth over the last couple of decades. Communications companies will continue powering this expansion in decades to come.
However, stock returns from the top telecom companies are running behind compared to big tech companies.
How to research and analyze communication stocks
The communication sector is quite large, containing multiple companies in different fields. It is highly recommended that you compare communication companies that operate primarily within the same industry or are equal in growth.
Engagement trends and usability levels can give one insight into how a business (or one of its products) performs. Investors use this data to look at how much the company will earn depending on shifts in the user base, new tendencies generating usability, and user monetization changes.
Even if a company increases its earnings relatively slowly, communication companies that deliver monetization through dividends can mean significant returns. Telecom companies are more likely to pay bigger dividends than information tech companies. This incentivizes stock ownership even if the growth earnings are lower in telecom.
When you analyze dividend stocks, it’s good to keep in mind metrics like dividend yields (an annual dividend payment to shareholders of a stock written as a percentage of the stock’s current price) and the number of years a company has managed to increase its payout.
Investors should pay attention to a company’s costs and whether they are paying their expenses in time. The amount of money companies in the telecommunications industry invest in infrastructures like cell towers, and satellites is massive. If you are interested in tech companies, you can look at their research and development to get an idea of how much money they’re putting into creating new technologies and products.
Why investing in the communications sector means return potential
Communications heavily impact economic development. Computers and technologies are a part of day-to-day work and interactions. 5G internet is bound to bring massive improvements in network speeds, translating into enormous growth in smart cities, VR, automated vehicles, and many other advancements. Telecommunications and information technology companies will experience high demand for many of their services, products, and constant innovation needs.
Investors that hop on the bandwagon will be compensated in the long term, enjoying substantial returns from investing in the sector.
Three of the biggest communication stocks to look at
AT&T (NYSE: T)
Weilder of the second-largest mobile wireless network in the U.S. and owner of one of the world’s most influential entertainment networks, Warner Media, AT&T stands as one of the top stocks in the sector.
This telecom behemoth is known to pay handsome dividends that will only grow with the benefits it’s bound to experience once 5G becomes widely available.
Verizon (NYSE: VZ)
The biggest mobile wireless U.S. carrier. As consumers and businesses adopt 5G, its high-rated service, the company is also bound to evolve and grow. Despite a rocky road during the pandemic, the company predicted to stabilize. Next-generation wireless services will boost this company even further.
Alphabet (NASDAQ: GOOG)
Alphabet’s Google is the top search engine and digital ad platform. It also hosts many other communications products and services:
YouTube is the biggest video streaming service in the world, while Gmail is the second-most-used email service. What’s more, Google’s Android platform is the most used mobile operating system.
Most of its revenue comes from digital advertising. Its significant investments in AI technology will probably empower the company even more by creating new growth possibilities.