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3 High-Yield Telecom Stocks Outperforming the S&P 500 in 2021

The telecom industry is expected to continue growing in the near term as the 5G rollout continues. So, we think it could be wise to add high-yield telecom stocks BCE (BCE), Telefónica (TEF), and Lumen Technologies (LUMN) to one’s portfolio now. These stocks have outperformed the S&P 500’s returns so far this year and could continue to do so in the near term. Let’s discuss.

The demand for telecommunication services increased amid the COVID-19 pandemic as most companies adopted remote working structures. Investors’ interest in telecom stocks has remained high this year, as is evidenced by the SPDR S&P Telecom ETF (XTL) and the iShares U.S. Telecommunications ETF’s (IYZ) 15.6% and 11.4% respective gains year-to-date.

Furthermore, the telecom industry is expected to continue growing as the 5G rollout accelerates. According to a Research and Market report, the global telecom market is expected to grow at a 6% CAGR  between 2021 - 2025.

Therefore, we think it could be wise to add high-yield telecom stocks BCE Inc. (BCE), Telefónica, S.A. (TEF), and Lumen Technologies, Inc. (LUMN) to one’s portfolio . These three stocks have also outperformed the S&P 500's 18.1% returns so far this year.

BCE Inc. (BCE)

Headquartered in Verdun, Canada, BCE is a telecommunications and media company that provides wireless, wireline, Internet, and television services to residential, business, and wholesale customers. The company operates through three segments: Bell Wireless; Bell Wireline; and Bell Media.

On September 14, BCE expanded its pure fiber Internet access to 54,000 locations in Oshawa. Rizwan Jamal, the President of Bell Residential and Small Business, said, “Bridging the digital divide is a priority for Bell as we advance how Canadians connect with each other and the world.”

For the second quarter, ended June 30, 2021, BCE’s operating revenue increased 6.4% year-over-year to $5.7 billion. The company’s adjusted net earnings came in at $751 million, representing a 31.1% year-over-year rise. Also, its adjusted EBITDA was $2.48 billion, up 6.2% year-over-year. The EPS came in at $0.83, up 31.7% year-over-year.

BCE’s revenue is expected to total  $18.81 billion next year, representing a 5.4% year-over-year rise. In addition, the company’s EPS is expected to increase 7.3% year-over-year to $2.53 in the current year. The stock has gained 18.5% in price year-to-date to close Friday’s trading session at $50.73.

Telefónica, S.A. (TEF)

Headquartered in Madrid, Spain, TEF provides telecommunications products and services, including mobile services, fixed-line telephony, and digital services. The company serves more than 337 million customers worldwide.

On August 10,TEF entered a collaboration among Telefónica Tech, TEF’s digital branch, and ATCSC, the cyber security arm of Saudi Arabia's stc. Telefónica Tech’s International Markets Sales VP, Rames Sarwat, said, “The agreement with ATCSC will allow us to share knowledge on the best techniques to detect and resolve threats in our respective markets, which is essential given the current international expansion of businesses.”

TEF’s revenue increased 3.4% year-over-year in organic terms to €9.96 billion ($11.70 billion) for the second quarter, ended June 30, 2021. While its net income increased 1,721.9% year-over-year to €7.74 billion ($9.09 billion), its EPS came in at €1.37, up 1,857.1% year-over-year. Also, its OIBDA came in at €13.47 billion ($15.82 billion), up 3.3% year-over-year.

Analysts expect TEF’s EPS to increase 6% year-over-year to $0.33 in its fiscal year 2022. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 20.1% in price so far this year to close Friday’s trading session at $4.85.

Lumen Technologies, Inc. (LUMN)

A facilities-based technology and communications company LUMN operates through five segments: International and Global Accounts Management; Enterprise; Small and Medium Business; Wholesale; and Consumer. It serves approximately 4.5 million broadband subscribers worldwide.

Last month, LUMN introduced Lumen Edge Private Cloud, providing pre-built infrastructure for high-performance private computing connected to a global fiber network. Chris McReynolds, LUMN’s vice president of cloud edge product management, said, “Lumen has decades of experience helping our customers implement private cloud solutions for critical workloads, and now we are extending our private cloud capabilities onto our ultra-low latency edge platform.”

LUMN’s operating income increased 11.4% year-over-year to $1.01 billion for the second quarter, ended June 30, 2021. The company’s net income increased 34.2% year-over-year to $506 million. While its EPS came in at $0.46, up 31.4% year-over-year, its adjusted EBITDA came in at $2.09 billion, up 0.2% year-over-year.

The stock has gained 32.7% in price year-to-date to close Friday’s trading session at $12.94.

BCE shares were trading at $50.02 per share on Monday afternoon, down $0.71 (-1.40%). Year-to-date, BCE has gained 20.15%, versus a 16.35% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.


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