Bigger than Verizon and sporting an 8.87% dividend yield

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

Image003

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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Published in: on July 5, 2011 at 1:16 pm  Leave a Comment  

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