Led by Verizon And AT&T, Telecom Tops S&P Sectors; Dividends Rule
With Verizon Communications ( VZ ) stock up nearly 17% and AT&T ( T ) soaring over 14%, the S&P telecommunications services sector is poised to lead the S&P 500’s 10 sectors in Q1 performance. As of afternoon trading in the stock market today , the S&P telecom services sector ranked tops, with utilities the only other sector posting a double-digit gain, for the first three months of 2016. “Absent some blow-away window dressing late in the session, that’s the way” the quarter will end up, S&P analyst Howard Silverblatt told IBD. The S&P telecom services sector is up over 15% in Q1. High dividend-paying Verizon and AT&T are among the best-performing stocks in the S&P 100 this year. Smaller phone companies also have outperformed, with CenturyLink ( CTL ) jumping 26%, Frontier Communications ( FTR ) up 20% and Windstream Holdings ( WIN ) gaining nearly 17%. Among wireless-only service providers, shares of T-Mobile US ( TMUS ) are down about 2% and Sprint ( S ) stock is near down 4.5%. Neither T-Mobile nor debt-laden Sprint pay dividends. Though they’re not in the S&P telecom services group, cable TV companies also posted solid returns in Q1. Shares of Charter Communications ( CHTR ) and Time Warner Cable ( TWC ), which plan to merge, are both up 10% in Q1. Analysts expect the Charter-TWC deal to close in May. Comcast ( CMCSA ) stock is up 8% this year, and shares of Cablevision Systems ( CVC ) have edged up over 3%. The Q1 laggards have been the financial, health care and consumer discretionary sectors. Craig Moffett, an analyst at MoffettNathanson, says Verizon and AT&T have benefited from global interest rates falling and “risk appetites withering.” “Whether the telco rally has legs will depend on fundamentals and growth and perhaps a change in industry structure,” Moffett said in a research report. Federal regulators, though, have been opposed to wireless consolidation, such as a Sprint and T-Mobile merger. AT&T has also been boosted by its purchase of satellite TV broadcaster DirecTV Group, analysts say. At Barclays, analyst Amir Rozwadowski in a report said that while the “flight to safety trade” isn’t showing signs of dispersing, investors may look at fundamentals more, going forward. IBD’s Telecom Services-Integrated group ranks No. 39 out of 197 industry sectors. AT&T is an IBD Leaderboard stock. Image provided by Shutterstock .