On T and VZ, the dividends and the fact that they have lagged the market during the recovery are the reasons to look at them. Telecommunications may come back into vogue and we would be rewarded.In addittion, they are low beta stocks.
If we discount the annual dividends (after taxes) using the 10-years treasury bond yield as the risk-free rate (3.22%) and substract the price of the stock, we have the highest present value of the cash flow of all the 30 companies listed in the DOW JONES.
Some numbers:
EPS 12/2008: $0.41
EPS 03/2009: $0.53
EPS 06/2009: $0.54
Annual dividend: $1.64. Taxes: 35%
Discount cash flow = - Today's price close + Annual dividend *(1-35%)/ (Risk free rate) =
-27.15 + 1.64*(1-0.35)/0.0325 = $5.65
The discount cash flow (using the risk free rate) is the highest in the Dow Jones.
In addition, the payout ratio is very high. We can doubt on the sustainability of the dividends in the near future, but the EPS and sales are stable. However, 100% of the revenues come from the US, which increase the volatility of them.
Some charts:
REVENUE, GROSS PROFIT AND GROSS MARGIN:
Interest Coverage:
