The communications sector, which covers telecom services, telecom equipment providers and media and entertainment firms, such as Google’s parent Alphabet, Facebook’s owner Meta Platforms, Comcast and The Walt Disney Company, has outperformed every other sector in the S&P 500 over the past year.
While communication stocks have gained more than 40% over that period, the S&P 500 index has added about 20%. The main drivers have been expectations that the US Federal Reserve is going to cut interest rates, the generative artificial intelligence (AI) revolution and the spread of 5G broadband. All in all, the digitalization of everything that relies on communication services lies behind the trend.
In this guide, we explore 10 communications stocks that appear to be set up for long-term success even if the tide turns. Read on to discover our top picks of communications shares.
Let’s begin with an overview of the best communication stocks in the market in 2024: Now, let’s dive deep into the investment case for the top communications and telecom shares that investors should be looking at in 2024: Alphabet is among the world’s most valuable companies with a market capitalization of more than $2 trillion. Its shares soared 10% on the day Google’s parent released earnings for the first quarter. Investors focused on its strong earnings from its cloud computing unit Google Cloud and YouTube’s advertising businesses, both of which have been bolstered by generative artificial intelligence (AI) tools. The company also delighted investors with announcing the first-ever dividend. Best-known for its search engine, Alphabet is also classed as a telecommunications company because of its Google Fi mobile phones and service and its YouTube advertising sales. Alphabet is in everything, so it shouldn’t be surprising that its GFiber business sells internet connectivity and Wi-Fi in parts of the US. The company has also spun off its Aalyria business, which has a software platform to manage a mesh network of communications satellites.
The US small-cap stock isn’t a telecom company, but a pure research, innovation, and licensing company whose innovations are used by telecom companies. It develops advanced telecommunications technology and then makes money by licensing that to telecom and entertainment firms, auto manufacturers, electronics makers and providers of cloud-based services. It has a huge patent portfolio, with more than 30,000 patents in wireless, video and AI technology. It’s developing an advanced version of 5G, which would be suitable to use beyond smartphones, for instance, for autonomous driving or medical procedures. InterDigital had a record $549.6 million in revenue in 2023, which was up 20% from 2022. For 2024 it forecasts revenue of between $620 million and $670 million, which would imply a 17.3% increase at the midpoint. EPS in 2023 was $7.62, rising 148%. The company also raised its quarterly dividend by 14% this year to $0.40.
Meta joined the exclusive trillion dollar club earlier in 2024 and currently it has a market cap of $1.14 trillion. Its family of applications include a trio used for messaging, led by the most popular one, WhatsApp, which now delivers nearly a billion messages a day. There’s also Instagram and Facebook Messenger, which are both used for messaging. Because of these apps, Meta is delivering a large amount of media and communications content. In some ways, text messaging on Meta Platforms is drawing dollars away from more traditional telecom firms. In the first quarter, Meta had $36.5 billion in revenue, up 27% year over year, and EPS of $4.71, up 114% over the same period last year. The reasons for the increase included a 7% increase in “daily active people” from a year earlier to 3.24 billion and ad impressions that rose 20% over the same quarter a year ago. Even with those numbers, its shares dropped after the first-quarter earnings announcement because of the company’s underwhelming guidance and heavy spending plans on AI. In the long run, though, Meta is well-placed to use AI to improve its advertising metrics. The share price is still up more than 78% over the past year.
The communications and media company with a market cap of $152 billion provides internet, cell phone service and also owns NBC Universal with movie studios and theme parks. The company owns plenty of content that it can provide on its Peacock streaming service. In the first quarter, Comcast posted revenue of $30.1 billion, up 1.2% year over year, and EPS of $0.97, up 6.5% over the same period in 2023. Its films came home with eight Oscars and Peacock continues to grow, with paid subscribers rising 55% year over year to 34 million, while Peacock sales climbed 54% to $1.1 billion over the same period. Comcast raised its dividend by 6.9% this year to $1.24, its 16th consecutive annual increase. Between the $1.2 billion in dividends and 56 million shares it repurchased, it delivered a total capital return to shareholders of $3.6 billion. With its cash flow rising by 20% year over year, there should be more room for share buybacks, dividend increases and to invest more. Trading at less than 11 times earnings, it appears a bargain, considering its financial performance and outlook.
The REIT operates 39,000 cell towers across four continents and the continued 5G rollout lifts demand for its towers from telecom providers. While high interest rates may impede its growth, the company has been able to pay down its net debt. In terms of its key metrics, it had $2.71 billion in sales, up 2.9%, and AFFO per share of $13.08 last year, topping any cell tower company. This year, SBA is predicting AFFO per share of between $13.15 and $13.51, up 1.9% at the midpoint, and it expects sales of between $2.669 billion and $2.709 billion, flat compared to 2023. SBA raised its quarterly dividend by 15% this year to $0.98 per share, the fourth consecutive year of increases since initiating one in 2019. Based on the company’s expected AFFO in 2024, the AFFO payout ratio is less than 30%, leaving room for more increases or investment.
The Chinese company has 488 million 5G subscribers and a total of 996 million mobile users and a market cap of $152 billion. It has said it plans to launch 5G-advanced (5GA) technology in more than 300 cities across China this year, and as part of that launch, it’s adding 20 models of 5GA phones. There’s plenty of room for continued expansion. According to GSMA research, by 2030, Chinese 5G connections will account for a third of the global total, with 5G adoption reaching nearly 90% in the country. In the first quarter the telecoms firm reported revenue of CNY 263.7 billion ($36.4 billion), up 5.2% year over year. Net profit climbed by 5.5% over the same period last year to CNY 29.6 billion. The company did get some bad news on April 25, when the FCC said it was ordering any Chinese company to discontinue fixed or mobile broadband internet operations in the US. However, nearly all of China Mobile’s business is in Asia and it trades on the Hong Kong bourse. It has an above-average dividend yield and is priced below 11 times earnings.
Orange’s merger with Spanish telecom Másmóvil should drive revenue and cost savings for both companies. The combination, now called Masorange, will be the largest telecom firm in Spain in terms of customers. Orange also narrowed its focus by selling off its Orange Bank branches. The company raised its yearly dividend payout by 7% this year to 0.75, giving it a yield of around 6.73%. Considering that dividend and Orange’s earnings potential, it appears underpriced with a price-to-earnings ratio of below 13.
Nippon continues to see an increase in mobile communication services subscriptions and fixed-line broadband subscriptions and recently came out with a prototype chip that it says will increase communications speeds in data centers and in its undersea fiber optic cables. It has 87.5 million subscribers through its subsidiary NTT DoCoMo, the largest wireless operator in Japan. NTT East and NTT West are its regional fixed line and broadband operators. Nippon’s NTT Communications unit and NTT Data, a partially owned subsidiary, also provide information technology services and communication services. Sales rose by 1.5% year over year to JPY 9.7 trillion ($61.3 billion) through the first nine months of fiscal 2023, and it posted EPS of JPY 11.98, up 1.6% over the same period last year. NTT has increased its twice yearly dividend for 13 consecutive years, including a 4% increase last year. The company, at the same time, has lowered its dividend payout ratio to 33.8% from 42.3% in 2020, yet its dividend yield is more than twice the S&P 500 average.
Charter is the largest cable operator in the US, with a market cap of $38.4 billion, more than 30 million customers in 41 states through its Spectrum brand. While pay-TV subscribers are falling as more people cut the cord, it offers both legacy cable services and telecom services. The company saw a slight rise (0.2%) in 2023 revenue to $13.68 billion, thanks to increases in residential mobile service, residential internet and advertising sales revenues, partly offset by lower residential video revenue. Net income climbed 8.4% to $1.1 billion, led by higher adjusted EBITDA and a gain on sale of assets, partly offset by higher income tax and interest expenses. Charter is trying to leverage its big customer base and keep them from leaving by bundling traditional cable TV with new options that include streaming content. One downside is that, unlike the rest of these stocks, it does not provide a dividend.
T-Mobile has recently passed five million high-speed internet customers and is leading US telecom firms in growth, particularly in the postpaid phone market and broadband markets. The company just got approval from the Federal Communications Commission for its $1.35 billion deal to buy Ka’ena Corp, the owner of budget service provider Mint Mobile and Ultra Mobile. In the first quarter, T-Mobile added 1.2 million net new customers. While overall revenue was down 0.2% at $19.59 billion, it had total service revenues of $16.1 billion, which was up 4% year over year, and postpaid service revenue of $12.6%, which rose 6% from the same year-earlier quarter. Net income increased 22% year over year to $2.4 billion, and EPS was up 27% from the same period last year. T-Mobile returned $4.3 billion to stockholders in the quarter including $3.6 billion in stock buybacks and $769 million following the initiation of its first dividend. The company is forecasting net customer growth of between 5.2 million and 5.6 million this year, up from its earlier guidance of between 5 million and 5.5 million.
Telecom Services: These are companies that provide communications services to businesses and consumers, such as wireless phone service, cable television and internet services. Examples include T-Mobile, Comcast, Orange SA, Verizon Communications, Charter Communications, Nippon Telegraph and Telephone and China Mobile. Telecom Equipment: The category includes companies that design, develop, and manufacture the physical equipment used in telecommunications networks, everything from routers and cell phone technology companies to cell phone towers. Examples include InterDigital, Cisco Systems (NASDAQ: CSCO) and Ericsson (NASDAQ: ERIC). Wireless communication: Companies that own cell towers and other infrastructure that telecoms use to provide wireless phone service. A key example is SBA Communications or American Tower Corporation, which leases space on their cell towers to telecom service providers. Media & Entertainment: These are firms that create and distribute content, such as television networks, cable companies, streaming services, and social media platforms. Examples include Alphabet, Meta Platforms, Netflix (NASDAQ: NFLX), and the Walt Disney Company (NYSE: DIS). Media companies also rely on telecommunication companies to deliver their services. People use a data connection (cellular or wifi) to access Google Search or Facebook. However, both have also moved occasionally beyond a symbiotic relationship with telecoms to providing services that compete with telecoms. The industry features many innovative businesses with high-growth potential. The investments these firms make in technology and innovation provide opportunities for share price growth and they provide things that people use every day, so they have a global reach. Many telecom companies provide services that people use every day, so they can count on a steady stream of revenue. The demand for data and reliable communication is on the upswing and this is a long-term trend. As the internet becomes more integrated into our lives, the need for fast and dependable data connections will only increase. This fuels growth for telecom companies that provide these services. To find information on communications and telecommunications stocks, we recommend checking out AltIndex, a subscription-based service that uses alternative data and artificial intelligence (AI) to rate stocks. AltIndex updates its data throughout the day. The service has ratings for several top lists that include good communications and telecommunications stocks. The lists update every half an hour and provide real-time updates on share prices. They use an AI score, taken from several datasets, to show which stocks are likely to make a big move. Stocks are scored from 1 to 100, simplifying selections for investors. AltIndex includes web searches, customer satisfaction ratings, social media, and app downloads, to help it analyze a company. There’s also a stock screener that can be used to look specifically at various stocks, with a drop-down menu that can rate them according to several categories. AltIndex has more than 10,000 members and provides more than 100,000 stock insights and alerts each day and has a strong win rate of 75% from its AI stock picks. You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well as many other useful features. The umbrella for communications and telecommunications stocks is a large one, though many of the stocks in the sector have one thing in common – the ability to reach a lot of consumers. The firms that are the most able to leverage that reach are the top long-term investments in the sector. It’s a very competitive sector and innovations, including AI, force companies to continually evolve or find themselves left behind. The best telecommunications companies and communications companies are willing to spend to improve their ability to serve their clientele and to attract new ones. These firms make great long-term investments because they are preparing for the next technological advancement, instead of strictly focusing on the most recent technological change. https://digital.fidelity.com/prgw/digital/research/sector https://abc.xyz/assets/91/b3/3f9213d14ce3ae27e1038e01a0e0/2024q1-alphabet-earnings-release-pdf.pdf https://s25.q4cdn.com/626766191/files/doc_financials/2023/q4/Supplemental-Materials-Q4-23-Final.pdf https://www.rcrwireless.com/20240401/5g/china-mobile-to-launch-5g-a-in-300-cities-this-year-report https://s29.q4cdn.com/310188824/files/doc_news/Q1-2024-Earnings-Release-vFinal.pdf I am an experienced journalist who has also worked as an editor and writer at the Savannah Morning News, Salt Lake Tribune, USA Today, Stars and Stripes, and The Motley Fool. I spent the first half of my career in sports journalism, but in recent years have switched to writing about my other passion, stocks, particularly healthcare, real estate and consumer staples stocks. I've won numerous journalism awards from the Associated Press and state press associations and have been a judge for the Georgia Sportswriters Association. I've written one non-fiction book, Just One More Time, about Georgia Southern football, and…Best Communications Stocks to Buy
A Closer Look at the Top Communications Stocks to Invest in
1. Alphabet – Google’s Parent Continues to Thrive
Ticker?
P/E?
Dividend Yield
NASDAQ: GOOG
27.45
0.12%
2. InterDigital – Providing the Backbone of Research for Telecoms
Ticker?
P/E?
Dividend Yield
NASDAQ: IDCC
13.22
1.59%
3. Meta Platforms – Keeping Billions of People Connected
Ticker?
P/E?
Dividend Yield
NASDAQ: META
24.98
0.46%
4. Comcast – Streaming, Film Studios Spur Expansion
Ticker?
P/E?
Dividend Yield
NASDAQ: CMCSA
10.30
3.20%
5. SBA Communications – Profit Propelled by 5G Demand
Ticker?
P/E?
Dividend Yield
NASDAQ: SBAC
43.40
1.96%
6. China Mobile – Plenty of Room for Continued Expansion
Ticker?
P/E?
Dividend Yield
HKG: 0941
10.46
6.93%
7. Orange – Paring Down to Focus on Profitability
Ticker?
P/E?
Dividend Yield
NYSE: ORAN
12.63
6.73%
8. Nippon Telegraph and Telephone – Continuing to Innovate
Ticker?
P/E?
Dividend Yield
OTC: NTTYY
11.91
3.20%
9. Charter Communications – Parlaying Its Large Customer Base
Ticker?
P/E?
Dividend Yield
NASDAQ: CHTR
8.42
N/A
10. T-Mobile – Focusing on High-Speed Internet Expansion
Ticker?
P/E?
Dividend Yield
NASDAQ: TMUS
22.37
1.58%
Types of Communications Stocks
What Makes Telecommunications Companies a Good Investment?
Where to Get Communications Stock Tips and Insights
Conclusion
References
FAQs
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Jim Halley
Editor
