Investors drawn to large utility and telecommunications companies for their steady dividend yields have plenty of options, local analysts say.
Verizon tops the Investment Guide rankings in this sector, along with AT&T, IBM, Tulsa-based ONEOK and American Electric Power.
"Investors are attracted to the big telecom and utility companies for the dividend yields, first and foremost," said Keith Goddard, CEO of Capital Advisors Inc., a Tulsa-based management firm. "In this incredibly low interest rate environment, it's hard for investors to find a source of dependable yield, and utilities and telecoms are a good source for that."
The utilities sector represents industries that generate and deliver power and water. It includes nuclear facilities, electric and gas utilities, independent power producers, energy traders and generators and distributors of renewable energy.
Encompassing the telecom sector are companies that make communication possible on a global scale via either the internet or phone. The biggest firms in the sector are wireless operators, satellite companies, cable companies and internet service providers.
Verizon, which boasts an attractive dividend yield of 4.2 percent, continues to see growth in the fast-growing wireless business, said Jim Huntzinger, chief investment officer for BOK Financial. Verizon remains focused on growing its media technology platform through its recent purchase of Yahoo for $4.8 billion.
"Given the defensive nature of the telecom market, we think it should hold up well in uncertain markets," Huntzinger said.
AT&T, which has a dividend yield of nearly 4.5 percent, continues to see strong cash flow due to cost savings, he said. In October, it is planning to launch its Over the Top streaming TV subscription, which will include Direct TV Now, which should help attract the millennial demographic.
"Many investors are replacing their bonds with utility and telecom stocks," Goddard said. "And that will work well as long as interest rates don't rise materially or the stock market doesn't go into a serious decline.
"Even in that case, the dividends are safe. It's a very sensible thing to use utility and telecom stocks as a source of income, but an investor has to recognize that there are going to be times when portfolio will move up and down a whole lot more than it would have than if they had stayed with bonds."
IBM provides information technology as well as telecommunications and cloud computing services worldwide. The firm, which has offices in Tulsa and Oklahoma City, is among the four companies that dominate the marketshare in cloud-based services.
OKE is the general partner of ONEOK Partners LP, which owns and operates one of the nation's largest natural gas liquids systems. Since becoming a pure-play general partner in 2014, OKE has seen a 54 percent dividend increase and now has a dividend yield of 5.25 percent.
American Electric Power is the parent company of Public Service Company of Oklahoma, which is headquartered in Tulsa and provides electricity for more than 540,000 people across the state. Founded in 1906, AEP has paid out dividends for more than 400 consecutive quarters.
"For the large and established utility companies like AT&T, like American Electric Power, the biggest driver of their stock price in the near term is likely to be interest rates," Gooddard said. "Those stocks will move in the opposite direction of interest rates.
"There could certainly be, in the case of the telecom companies, cycles in the pricing power for wireless or a price war can break out among the wireless carriers and get investors concerned about the future. But the biggest driver is going to be the direction of interest rates."
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