AT&T and Verizon are not the only large telecom companies with high dividends. Telefonica S.A. is a high dividend stock yielding 8.87%. The company is the incumbent fixed-line and wireless telephone operator in Spain and the Czech Republic. It has the second-most wireless subscribers in the United Kingdom and a big position in Germany. It has substantial fixed-line and wireless assets in Latin America, where more than 60% of its customers reside. However, they provide only 42% of its revenue and 41% of EBITDA. Telefonica also owns stakes in Telecom Italia and China Unicom.
Here is my first look at Telefonica S.A.
Telefonica S.A. (ADR traded on NYSE as ticker: TEF)
Market price: $24.12
Shares: 4.56 billion
Market cap: $110.17 billion (larger than Verizon, but slightly smaller than AT&T)
Dividend record: Good and growing
Dividend: $1.07 / semi-annual
Dividend yield: 8.87%
EPS: $3.26
Dividend payout ratio: 66% ($2.14 dividend / $3.26 EPS)
Earning power: $2.57 per share at 4.56 billion shares
(Earnings adjusted for changes in capitalization)
Earnings in Euros. Use the exchange rate below to convert to USD.
EPS Net inc. Adj. EPS
2006 1.30 6,238 M 1.37
2007 1.87 8,895 M 1.95
2008 1.63 7,592 M 1.66
2009 1.71 7,776 M 1.71
2010 2.25 10,167 M 2.23
Five year average earnings (in EUR) 1.78
Value territory at less than 12 times average earnings = 21.41 EUR
Speculative territory at above 20 times average earnings = 35.68 EUR
Exchange rate today:
0.6938 EUR = $1 USD
$1.4414 USD = $1 EUR
Valuations in USD
Five year average earnings in USD = $2.57
Telefonica S.A. trading at $24.12 per share which is 9.38 times average earnings. This is value pricing.
Value territory at less than 12 times average earnings = $30.86
Speculative territory at more than 20 times average earnings = $51.43
Balance sheet: Shareholder equity is slowly growing
Book value: 5.57 EUR or $8.03 per share
P/BV: 3.00 (that’s okay, but not great)
Current ratio: 0.75 (greater than 2.0 is good)
Quick ratio: 0.70 (greater than 1.0 is good)
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