Telcos - dial D for dividend?
Look at the return on equity, as well as the free cash flow
Add BT as a preferred sourceTELECOM companies are generally viewed by investors as defensive shares. In other words, they can be in demand when economic growth is slow. That's because they could compensate for lower interest rates we earn from our savings accounts, thanks to their reliable dividends. But there's a downside. They can lag the market when economies are growing quickly. After all, who would want dividends when share prices are shooting the lights out?
So, are telecom shares worth the effort? From a total return perspective, they could be. The median annual total return over the last decade for a basket of global telecom companies is a not-at-all-disappointing 8.7 per cent. In other words, S$1,000 invested in those businesses would have been worth S$2,303 after 10 years.
But there are notable differences. Singtel has returned about 3.8 per cent annually, StarHub has returned 2.2 per cent, while Japan's NTT has delivered a total annual return of 10.6 per cent over the last decade.
