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The telecommunications industry includes a range of companies that provide residential and commercial communications solutions. It could be a good time to invest in the sector — operations have grown in recent years.

Check out our guide to learn more before you invest. We’ll also introduce you to some of the best telecom stocks to watch.

Snapshot: Telecom Stocks

Basically, any type of telecommunications system has 3 essential parts:

  • A transmitter that receives information and converts it into a signal to travel a long distance.
  • Medium or transmission channel that carries the signal to its destination.
  • A receiver that accepts the signal and converts it back into useful information for the receiving party.

The 1st type of telecommunication that most investors think of is cell phones and 4G or 5G mobile phone service. Mobile phones are a major segment of the telecommunications market, but other products and services offered by telecommunications companies include landline telephone service, broadband Internet services, cable television and satellite television.

The continued growth of the telecommunications industry makes it attractive for investors. Many telecommunications companies also offer hot stocks under $10 – a great choice if you’re a value investor.

Best Online Brokers for Telecom Stocks

You need to open an account with a brokerage firm, whether you’re looking for long-term telecom giants or looking to buy a few stocks for less than $5.

A broker is a person or company that you authorize to buy and sell assets on your behalf. You will need a broker before you can start picking stocks and funds because the general public cannot buy or sell stocks directly.

Consider our top picks below when you’re ready to choose a broker.

Features To Look For In Telecom Stock

Knowing how to value telecommunications stocks can help you choose the right investments for your goals. Here are some features to look for when you’re just starting out.

  • An earnings per share value that indicates the company is profitable: You can calculate a company’s earnings per share (EPS) value by dividing its current earnings less dividends by the company’s current number of shares outstanding. Many telecommunications companies have huge operating expenses, so these types of companies may not post the exorbitant annual profit that other companies make. Look for stocks with a positive EPS value – this indicates that the company remains profitable.
  • A safe dividend yield: Many investors look to the telecommunications industry for dividend payments to create a passive stream of income. While telecommunications companies often offer dividends (which are sometimes quite high), you should only invest your money in companies that can sustain those dividends.

Don’t just look at the dollar amount the stock pays out per year or per quarter when comparing stocks. Instead, look at the company’s dividend yield. The dividend yield is calculated by dividing the company’s annual dividend by its current share price. Beware of stocks that offer a dividend yield of more than 10%. This may indicate that a dividend cut is imminent.

  • A company attentive to technological developments: Technology is changing at a faster rate than ever, and consumers expect phone and internet providers to keep pace. Whether investing in 5G technology or using satellite technology to extend TV services to areas where cable TV is unavailable, look for companies that are focused on growing communications technologies.

Strengthen your investments

Investing in telecommunications stocks can be a great way to shore up any stock portfolio. You will find excellent dividend potential and promising high-tech products.

It’s important to remember that even large-cap telecom stocks are not risk-free investments. They should never make up the majority of your portfolio. Use telecom stocks to complement a broader portfolio of total market index funds, large-cap mutual funds, and S&P 500 funds.


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