Big Dividends From Euro-zone Stocks
Companies / Dividends May 27, 2013 - 02:08 PM GMTBy: Investment_U
Steve McDonald writes: Barron’s ran an article last week about three of the grandfathers of the tech industry: Cisco Systems (Nasdaq: CSCO), Intel (Nasdaq: INTC) and Microsoft (Nasdaq: MSFT). Investors are making big bets that these old timers will evolve into effective data and services companies.
Cisco was the clear pick over the other two. Even though Microsoft and Intel have done well for the past year – up 21% and 10%, respectively – Cisco has blown away their numbers and has delivered 11 consecutive quarters of meeting or beating estimates.
It has doubled its dividend yield and has reset its growth expectations – both moves have been very well received by investors.
Cisco’s lack of competition from its chief competitors has allowed the company to increase its market share and, despite the run-up in price this year, the stock has a forward P/E of just 11.5.
The CEO said in the Barron’s article that the Street was wrong to bet against the company. When things get tough, he said, Cisco is the best.
This could be a rare opportunity to get onboard a tech play that is not a small or mid cap, offers the stability of a large established company, has increasing earnings and revenues and is trending upward.
The evolution of the big, old, tech companies is something you have to be a part of. Take a look at Cisco.
Across the Pond for Big Dividends
For the past 15 years, regulators in the European Union who control pricing for Internet and wireless have focused on competition instead of pricing.
The result has been very inexpensive service, over 50 providers, and very little investment in wireless, Internet technology or infrastructure. Europe, as you can imagine, is well behind the United States in implementation of 4G and fiber optics.
All that is about to change, and four big names – France Telecom (NYSE: FTE), Telecom Italia (NYSE: TI), Telefonica (NYSE: TEF) and Deutsche Telekom (OTC: DTEGY) – will be the winners.
Currently, smaller providers rent space on the networks of the four big providers. But regulators, in an effort to spur infrastructure investment, are about to raise those rents and allow the majors to raise their rates, too.
Neelie Kroes, the EU’s digital commissioner, also wants a single telecom market for the whole EU, which should allow for cheaper service between countries and encourage consolidation. Essentially, the EU system will end up being more like the American system, with two major providers.
The big four could see market values run up from 20% to 75%, but the big winner will be Deutsche Telekom.
The company already has a supportive regulatory environment that will allow it to thrive no matter what the EU does. It has won concessions from regulators for rate increases with inexpensive improvements to its system. It also owns 75% of T-Mobile, sports a 5.4% dividend and, despite a big move this year, has a P/E of just 13.
Telefonica and Telecom Italia have debt and dividend issues, and France Telecom is essentially a jobs and revenue provider, not a for-profit enterprise.
It looks like Deutsche could be the dominant player and the one to watch.
The “Slap in the Face” Award: The College Rip-off
This week, our award goes to all the new college grads out there, who have been scammed by the incredibly high cost of colleges and universities.
The average grad is $30,000 to $40,000 in debt and paid three times as much for their education as it cost just 25 years ago.
In the words of my father to my mother, where the heck is all the money going? This is nuts!
Private colleges in 1983 cost $11,000 a year in today’s money. Today they are $29,000.
Even state schools, which were a bargain when I was in school in the early ‘70s, are four times as expensive in today’s dollars. They average as much a year now as a four-year degree cost in 1983.
And these numbers do not include the extras: room, board, spending money, books, beer, transportation… you know the drill.
The result is 17% of student loans are 90 days late, or more. And 44% haven’t made the first payment.
This might be the biggest rip-off in our history. Where the heck is all the money going? This is truly a big slap in the next generation’s face.
Source: http://www.investmentu.com/2013/May/big-dividends-from-across-the-pond.html
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