These 2 Popular Telecom Stocks Are Paying 8%+ Dividend Yields, But Are They Traps?

In today’s economic uncertainty, telecom stocks can be a great addition to your portfolio due to their defensive properties. Defensive stocks are more resilient to market downturns since they represent companies that offer essential services. These stocks are known to outperform the general stock market during recessions.

Apart from their defensive properties, the telecom industry is known for its superior dividend yields, which explains why telecom stocks are popular among savvy income investors.

Here are two telecom giants with yields above 8% for you to consider:

Vodafone Group

Vodafone Group PLC  VOD has a trailing dividend yield of 10.61%, compared to the industry average of 6.27%, but is the dividend yield sustainable?

Vodafone has made consistent payments since 1989. However, the amount paid has decreased rapidly in recent years, with a five-year dividend growth rate of -10.99%. The high dividend yield paid today is, therefore, not a result of an increase but rather a consequence of a falling stock price.

The company’s payout ratio of 202% also signifies trouble, as it is highly likely that it is borrowing to pay dividends. Vodafone Group PLC is heavily in debt, with a total debt to equity (most recent quarter) of 97.57%.

BCE

The other trending telecom stock is the Canadian telecom giant BCE Inc BCE. This stock offers a trailing dividend yield of 8.61% and has a payout ratio of 202.07%. BCE’s stock price has plummeted by 18.34% in the last year as analysts raise alarms over its elevated debt ratios.

The company has consistently paid quarterly dividends since 1983, with a dividend increase every quarter since 2015. However, this is not enough reason for income investors to buy the stock since its fundamentals do not support future payments.

While these telecom stocks may seem attractive due to their high dividend yields, investors should approach them with caution, as their fundamentals suggest that their dividends may not be sustainable in the long run.

There Are Better High-Yield Opportunities

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For example, the Jeff Bezos-backed investment platform just launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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