# Verizon or another Telecommunication stock?



## Dopplegangerr (Sep 3, 2011)

Curious what anyone's opinion is on Verizon (VZ)?
I am looking to add a telecom stock to my portfolio for long term, something with a nice dividend I can feel confident in. 
Thoughts, fears, concerns, recommendations?


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## sharbit (Apr 26, 2012)

Dopplegangerr said:


> Curious what anyone's opinion is on Verizon (VZ)?
> I am looking to add a telecom stock to my portfolio for long term, something with a nice dividend I can feel confident in.
> Thoughts, fears, concerns, recommendations?


The P/E=43.57 which is a little pricy. If you exclude their bad quarter as an anomaly its still ~25x. Their dividend is quite good but about 90% of earnings. I would go domestic personally; T,RCI and BCI are all better IMO.


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## sam (Mar 16, 2012)

how about rogers ?


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## humble_pie (Jun 7, 2009)

somewhat to my surprise, when i opened a brand-new report from ARC (accountability research corporation) on verizon, they were recommending Buy. They like the vodafone connection & the wireless potential.

i like ARC. It's a forensic analysis service. No investment investment banking, no broker sales. It sells its research, pure & simple.

even so i remain somewhat doubtful about vz. I already hold vz in rrsp, plus also have some cash to invest in rrsp, so could buy more. However the thought of buying more vz is not giving me warm fuzzy ringtones. I'm not hanging up, just putting the telco on hold. It's more of a sector thing. Telcos are looking peakish ...


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## Argonaut (Dec 7, 2010)

humble: if you feel telcos are toppish, perhaps you could sell a call on it. This could be a long-distance call, which tends to bring in more revenue. Once your minutes expire, perhaps you can reload and do it again. Long-distance calls: good for making money on telcos?


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## humble_pie (Jun 7, 2009)

Argonaut said:


> humble: if you feel telcos are toppish, perhaps you could sell a call on it. This could be a long-distance call, which tends to bring in more revenue. Once your minutes expire, perhaps you can reload and do it again. Long-distance calls: good for making money on telcos?




hi argo i have never held a telco without short calls connected.

my vz are wired to go at 40. Same thing for my bce. I had iyz but options grew impossible so i was recently able to sell at a good price. I used to have telus but they dialed that line a long time ago. It was one of my very few assignments.

last, i'm embarassed to say, i have tef in the rrsp, ouch. That one has short-circuited. I bravely keep on selling the calls olé but if i put the device to my ear i'd be electrocuted.


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## Argonaut (Dec 7, 2010)

Telus is one of my two or three favourite stocks, just got their shareholder package yesterday. Interesting to read through it. Stockwell Day has only a few more voting shares than I do, but makes a cool $100,000 sitting on the board. I wouldn't sell long-distance calls on it, but hope that customers keep making them so that we can afford to pay Stockwell Day for his participation in quarterly meetings.


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## Toronto.gal (Jan 8, 2010)

humble_pie said:


> 1. i'm embarassed to say, i have tef in the rrsp, ouch.
> 2. I bravely keep on selling the calls olé..
> 3. if i put the device to my ear i'd be electrocuted.


1. Gosh, disappointed to hear that you're not perfect! However, I'm proud to say that I sold it in 2011! Waiting for a div. cut perhaps to buy it back. There is a lot I like about the stock, such as its presence in the huge Spanish-speaking part of the world [bet you many people don't know the millions of people involved!]. I should say Portuguese as well not to leave Brazil out of L.America. 

2. Bravo on the calls selling! 

3. :chuncky: 

Might visit España this Summer!


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## humble_pie (Jun 7, 2009)

madre de dios i should get out my long list of imperfect losers ...

having a mess of tef in the pieplate illustrates 2 downsides:

1) it's difficult to research foreign stocks so stupid little crumbs like me should not try it;

2) the negative about stocks burdened with option positions is that investor cannot up & sell the stock on a whim. It is like moving house with 3 kids in school compared to moving when one is a student.

no, investor must first (nearly always, but 100% always in registered accounts) buy back the option so he has no naked option liability. Only after that can he sell the stock. 

the practical result is that short call artists tend to let stock positions run on far too long.

of course, over ultra-long periods of time this is a good thing, provided that investor has set himself up with hi quality stocks to begin with. Because ultra-long-term, stock markets mostly do rise. Over the course of half an investor lifetime, say.


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## Dopplegangerr (Sep 3, 2011)

Thanks everyone who got back to me. Lots to think about, and phone puns kept me entertained


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## PMREdmonton (Apr 6, 2009)

Instead of Verizon which owns 55% Verizon wireless and Verizon landlines, why not buy Vodafone instead.

You can buy an ADR from the US at a cheap price. It has a good dividend somewhere around 5% and pays twice a year. You will not get charged any dividend withholding tax so this is a good one for your TFSA. It owns 45% of Verizon wireless plus has major international exposure throughout UK, Europe and even some emerging markets. They have a low PE and lots of cashflow. While most of the Euro telcos have been trending down (TEF for example which I also hold) VOD is still holding up well.

If you want to bottom fish, I don't think TEF can get get beat up much more. I think it is trading around a PE of 4 and that is not phoney baloney earnings and they have a ton of FCF to comfortably cover that humongous dividend. It is getting beat up because they have a lot of debt, they've been trying to restructure the old part of their business (boring telco stuff in Spain) but this has cost them because of labor rules in Spain and Spain has been under a lot of heat lately with austerity, unemployment and rising bond yields. However, they have a lot of growth ongoing in emerging markets and get more than 70% of their revenue outside of Spain. If you have a strong stomach, this should turn around in the next couple of years and you'll collect a big dividend while you wait. I've been averaging down on this one and chose to sell some puts which I may get assigned for an all-in cost of about $13.50 which is a major bargain for this stock. If I don't get assigned I collect $150 per contract so it's a pretty good deal. 

Anyhow, I still think most people are better off avoiding the American telcos. Apple is taking them to the shed down there. I'd stick with Canada, some of the Europeans or maybe even something like TLK in Indonesia which is a fast growing market of 127M people.


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## Dopplegangerr (Sep 3, 2011)

Thanks Edmonton, thats some great information. Not sure if I have the stomach for TEF though, that thing has been beat to hell, and looks risky as. How long do you reckon they will keep there dividend that high? 
BTW what is an ADR, I tried looking up the symbol but I dont think thats the one you were talking about.
Cheers


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## PMREdmonton (Apr 6, 2009)

ADR = American Depository Receipt

My understanding is this is done for some big non-US listed stocks. A bank in the US is a designated buyer of shares of the underlying company. They then sell a form of virtual share listed on a US stock exchange whose price will move in ratio to the underlying share. The holders will get the appropriate ratio of dividends in USD. The foreign company will withhold the appropriate amount of withholding taxes depending on the agreement between that country and the USA.


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## humble_pie (Jun 7, 2009)

PMREdmonton said:


> Instead of Verizon which owns 55% Verizon wireless and Verizon landlines, why not buy Vodafone instead ... It has a good dividend somewhere around 5% and pays twice a year. You will not get charged any dividend withholding tax so this is a good one for your TFSA.


withholdings on foreign stock ADRs are indeed tricky ... i might be wrong on this but it's my understanding that standard US 15% withholding tax will apply to any VOD dividend paid to a non-registered account or to any registered account other than an rrsp.

i get it that the UK does not charge withholding on VOD dividends paid to the creator/manager of the US ADRs. But my understanding is that nothing prevents the US from extracting its 15% non-resident tax on dividends paid out from the ADRs to canadians, with rrsps being the sole exception because they are covered by the canada-US tax convention.


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## PMREdmonton (Apr 6, 2009)

humble_pie said:


> withholdings on foreign stock ADRs are indeed tricky ... i might be wrong on this but it's my understanding that standard US 15% withholding tax will apply to any VOD dividend paid to a non-registered account or to any registered account other than an rrsp.
> 
> i get it that the UK does not charge withholding on VOD dividends paid to the creator/manager of the US ADRs. But my understanding is that nothing prevents the US from extracting its 15% non-resident tax on dividends paid out from the ADRs to canadians, with rrsps being the sole exception because they are covered by the canada-US tax convention.


HP, I've heard different stories about this question. Most seem to say that you will not be charged a withholding tax but I have only held VOD in my RRSP so that is not a good test case and withholding taxes were not held. I've heard the same thing would happen with TFSA, that is no withholding taxes but I've never held a UK company in there to test it out.


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## sharbit (Apr 26, 2012)

I've been stalking TEF and FTE for a while now.

In regards to TEF, until Spain can get their nonsense figured out I think I'm going to wait. Right now the politicians seem intent on scuttling the country. For FTE I'm not sure why their so obsessed with not cutting the dividend; they've basically been burning through all their retained earnings in place of debt.


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## PMREdmonton (Apr 6, 2009)

Sharbit, it depends on your investing preferences and your risk tolerance. 

TEF is a very good company that is generating tons of FCF with a P/E < 3. They can comfortably cover their dividend. They are a leader in most countries where they operate from the US to Spain to Latin America. 

So if you're mostly worried about the country rather than the company Buffet would tell you to ignore all the macro and political stuff and just focus on the company itself. Sir John Templeton would tell you to be greedy when others are fearful right about now. I think TEF is ridiculously cheap and priced this cheap mostly due to macro concerns and this is a great time to buy. I sold a put with a $15 strike and will probably get assigned in the end but that is okay. I'll get TEF at a price of 13.50 per share and I'm content to hold this one for awhile. I wouldn't be surprised if it doubled in 3 years and then I get that 13% dividend on top of it all.

If you want the safer play buy VOD. If you want something even safer buy AT&T. If you want something even safer buy Telus.


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## humble_pie (Jun 7, 2009)

PMREdmonton said:


> HP, I've heard different stories about this question. Most seem to say that you will not be charged a withholding tax but I have only held VOD in my RRSP so that is not a good test case and withholding taxes were not held. I've heard the same thing would happen with TFSA, that is no withholding taxes but I've never held a UK company in there to test it out.



edmonton it appears you are right, there is no withholding tax either british or US on vodaphone in any type of account, whether registered or non-registered.

it was a comedy to check out what the broker is actually doing with VOD & other british ADRs. Not what they are saying, but what they are doing.

the representative looked up recent vodaphone dividends in non-registered accounts. We both knew there would be no british withholding tax on these ADR divs. He was expecting to see a US tax of 15% withheld from dividends, though. I was expecting the same.

nothing was withheld. Astonishment !!! he called in his team manager. More astonishment !!!!! no US withholding to be seen in VOD.

try british-american tobacco, i asked, the ADR symbol is BTI.

more astonishment !!!!!!! no withholding in tobacco either.

what about royal bank of scotland.

!!!!!!!!!! no withholding.

well. There's a pattern here. Publicly-traded british companies with US ADRs have no british or US withholding taxes on dividends in any type of canadian account.

i for one find it hard to understand why washington would offer such blinding generosity to foreign taxpayers. After all, the ADRs trade in the US, right under the IRS nose. ADRs are usually bundled foreign stocks, so they are not exactly the same security as the original shares, in this case vodaphone trading on london. It seems to me that washington should be able to claim an ADR as a US security & to collect the same 15% it would collect from equivalent US companies such as verizon or AT&T. However, washington is not collecting.

did anyone ever hear of the IRS not being greedy. But with respect to the handful of ADRs that slip through the eye of the needle - the underlying stocks belong to countries that don't withhold taxes on dividends - the IRS is not greedy.

the implications for tfsas are significant. This handful of US dollar ADRs with no withholding taxes are an opportunity to diversify outside canada in tfsa accounts with no foreign tax consequences.


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## londoncalling (Sep 17, 2011)

Very interesting findings HP. Does this vary from broker to broker? My guess is not but I don't like to guess. My thought is great news but for how long? If the IRS gets greedy and closes this door what will happen to the price of ADRs? Is there enough Canadian volume to affect the price? I assume most would just sell//transfer from TFSA and buy/transfer into the RRSP room permitting. Any thoughts?


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## humble_pie (Jun 7, 2009)

london it is indeed a fruitful & interesting issue. Unfortunately it does require a fair amount of intense research.

ottomh i think the IRS is unlikely to change (phew). I am guessing, as best i can guess, that international taxation lawyers helped form the IRS decisions on US withholding in ADRs long ago & these won't change.

as for the brokers, it's going to be hugely difficult to answer your question.

it was already quite rare that the discount broker to whom i turned would be willing or even able to research through their copious data bases in order to turn up the answers that he gave me. It was not a simple search for him. He had to cross-reference each bit of data.

in other words, i carefully chose the representative whom i asked. I have known him for a number of years. He's one of the best. He did me a special favour.

now the question in my mind at this moment goes like this:

_*which other countries in addition to Great Britain have zero withholding tax *?_

i'm interested because i believe that ADRs from corporations HQ'd in all those countries are also going to have zero withholding tax in any kind of canadian account, whether registered or unregistered.

here's one more tempting piece of info. Later, i asked another representative (equally excellent & painstaking) if he could please check out an ADR for a corporation whose host country does have a withholding tax. The question was: In non-registered accounts, is a 15% US withholding tax levied in addition to the withholding tax charged by the country of origin. The example i chose was our favourite, telefonica.

he located a recent telefonica dividend payment in a client's margin account. There was a 19% spanish withholding tax, which is something we all know about. There was a small fee, which most ADRs are charging these days. But there was no 15% US withholding on top of that ...

eureka !


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## BigMFfan (Feb 23, 2013)

I'd like to request an update on this topic. Can those who've actually purchased ADR's of UK (or any other) companies in their RRSP or TFSA account confirm or deny which ones do not appear to have any tax withheld?

Thanks in advance.


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## cato (Jul 4, 2011)

BigMFfan said:


> I'd like to request an update on this topic. Can those who've actually purchased ADR's of UK (or any other) companies in their RRSP or TFSA account confirm or deny which ones do not appear to have any tax withheld?
> 
> Thanks in advance.


I hold four UK company shares in a non-registered account, ie BBL, VOD (ADR), UL and RDS.B and have never been been charged a withholding Tax. I have also held TEF in the past in a non-registered account and a withholding tax of 19% was applicable. TEF at the time was offering a choice between dividends paid out as cash or paid out in script and clearly script was the better deal (no withholding tax).

Withholding tax depends on:

A) Withholding tax levied at source by the country in which the parent company is based
B) Tax agreements between countries ( which try to equalize tax rates between countries and prevent double taxation and usually supersede withholding tax rates)

The UK does not tax dividends, even if the company shares are held by a foreign investor in the form of ADRs and the taxation agreement prevents the USA from levying an additional tax on the ADRs. 

As for countries which do not tax dividends, here is a  LINK but one would have to read that after looking at taxation agreements as well.


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## BigMFfan (Feb 23, 2013)

Thank you, cato.

Coincidentally, I own those exact 4 companies + DEO. Now, I feel more confident of my decision to move these holdings into my registered account.


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## londoncalling (Sep 17, 2011)

I have been watching Verizon under perform the current market for quite some time. It keeps hitting lower lows and is near its 52 week average. Long term history of dividend payouts and increases. Margins are being squeezed by other carriers that have poked holes in the company's marketing strategy of paying more for Verizon's service. I have an order in below the 52 week but looked today and am tempted to lower my offer. I hold small positions in AT&T and Telus. Looking to add to Telcos. Waiting for a market correction but am getting an itchy trigger finger. Would welcome comments from the forum and any holders or followers of US telcos. Cheers


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## fstamand (Mar 24, 2015)

BCE has a rather juicy dividend AFAIK


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## londoncalling (Sep 17, 2011)

The divvy on BCE is often around the 5% mark. I would add more to telus if there was a major pullback. However, I am wanting to add to my US holdings. As a result was hoping for some opinions on Verizon as opposed to another telco like the title of the thread indicates.


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## Iczimek (Jul 3, 2017)

For long time I wanted to buy AT&T for dividend. Now I think they may have problem maintaining it. Would you agree? And Verizon and Yahoo deal make this one also not interesting. Can't see future for telecoms.


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## milhouse (Nov 16, 2016)

I think the future for telecoms is that so many things will be connected to the Internet and that will depend on the infrastructure that the telecoms build out. I'm not sure if that will be a major growth opportunity like how the initial wireless revolution was in the 2000's but I'm thinking it will at least provide a steady source of revenue for dividend growth.


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## milhouse (Nov 16, 2016)

There's an article by David Berman in the G&M today title "Telecom stocks: Stability at a price." However, it's behind a paywall.
In a nutshell, it says Canadian telecom stocks are more expensive than their US peers in terms of forward P/E, lower dividend yields, EBITDA, and profit growth.
Investors in Canadian telecoms are essentially paying for sector stability coming from (1) market dominance (BCE, Rogers, Telus, and Shaw control over 80% of the broadband and video market and over 90% of the wireless market) where while there is competition there is limited price aggression like there is with the fragmented market in the States, (2) limited threat of disruption from foreign competitors due to foreign ownership restrictions, and (3) limited threat of disruption from non-telecom competition like Google Fiber due to the Canadian market being so small, the market dominance by the big 4, and there being easier pickings in the States. 
Add that all up and Canadian telecoms are expensive but the price premium give you stability.

Just an aside, I've read in some other articles that Google is abandoning growing their Google Fiber footprint/business but will still support their existing customers. It sounds like the ROI isn't worth their while particularly with other solutions like 5G wireless, low orbit satellites, etc around the corner. 
But as an aside to the aside, broadband over fibre isn't going away as a core solution.


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## kcowan (Jul 1, 2010)

Does that mean that Google will outsource the fibre business to other carriers like they do overseas?


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## milhouse (Nov 16, 2016)

kcowan said:


> Does that mean that Google will outsource the fibre business to other carriers like they do overseas?


I haven't read anything about how their support model might be evolving except that existing customers will continue to be supported. That said, I do know that Google does outsource support of some, if not many, of their products to partner vendors that have points of presence around the world that have to meet service level and quality standards. It kind of makes sense to have the high paid Google talent focus on developing new ideas and products versus doing tier 1 grunt support.


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## stantistic (Sep 19, 2015)

*Experienced chartists wanted*

IMO the rising trendline for 10, 5, or 3 year charts appears to me to be "broken" for BCE. Any confirming or contrary opinions ?


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## zylon (Oct 27, 2010)

@ #32

Lots of stuff happening here for sure.

Definitely want the green support area to hold;
if it doesn't, $55 is a real possibility.



http://stockcharts.com/h-sc/ui?s=BCE.TO&p=W&st=2015-01-01&en=today&id=p57435370375


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## Eder (Feb 16, 2011)

I'm waiting for $50 to load up more...its a bit pricey now but the juice they pay is addictive. Most likely the market forgets about the interest rate hike and BCE goes back above $60 next month...they are still knocking the ball out of the park.


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## stantistic (Sep 19, 2015)

*BCE chart*

To my amateur chartist eyeballs, the 10 year chart for BCE cries out for a correction to $55 or even $50. The trouble is that I don't have the balls to give up the 4.5% dividend while waiting for it. 

Also complicating the outlook is the monster lurking south of the 49th parallel. It has shown a propensity for doing monstrously stupid things for which Elliot Wave Theory and Fibonacci Series are futile.


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## zylon (Oct 27, 2010)

*Back to topic - Verizon*



> Verizon’s stock has dropped more than 20% over the past year. The stock is officially in correction territory.


https://youtu.be/OqGasXGLIK4?t=20s


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## londoncalling (Sep 17, 2011)

Thanks for the interesting link zylon. Guess I will keep watching for the time being.


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