Tuesday, January 28, 2014
Chinese Telecoms – Enter the Dragons
US telecom stocks are known for yielding high and, for the most part, steady dividends. Investments in large US telecoms – like AT&T Inc. (T) and Verizon Communications Inc. (VZ) – return between 6% and 8% in annual dividends, which is pretty decent considering averages across other industries. However, if you’re a globe-trotting investor and find US stocks very vanilla, there are ripe pickings elsewhere as well. Case in point: Chinese telecom companies.
The Chinese telecom industry, the largest in the world, is dominated by three gigantic state-governed enterprises. While it may seem to some investors that state control puts limitations on their growth, it actually presents an opportunity for alpha to others: the stability and exclusivity that comes with being governed by the Chinese state is something unheard of in other parts of the world.
Of the three telecom companies that control the entire Chinese market, China Mobile Ltd (CHL) stands out as the largest, not only in the People’s Republic, but also in the world. The company’s stock also offers the highest dividend yield compared to comparable investments in China Unicom (Hong Kong) Ltd. (CHU) and China Telecom Ltd. (CHA).
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