Warren Buffett is a huge fan of dividend stocks right now.
He made bold bets on Verizon and Chevron, both of which are bountiful value plays with dividend yields that have swollen to the higher end of the spectrum of late. Unlike a bet on the ailing airline stocks, Verizon and Chevron are destined to survive the COVID-19 pandemic, regardless of how much worse it will become or how much longer it drags on.
In addition, both firms have more than enough to cover their rich dividend payouts. In this piece, we’ll concentrate on Warren Buffett’s latter bet, U.S. telecom kingpin Verizon, which I believe to be a play on the 5G boom.
5G plays are still worth betting on. Just ask Warren Buffett
People were scooping up wildly popular 5G-enabled devices like the iPhone 12 in 2020. People were ready for the next generation in wireless technology, and then the pandemic struck, severely muting the appetite for mobile data. Amid continued lockdowns and quarantines, 5G mobile data demand is likely to remain muted for at least another year until the insidious coronavirus abates. Despite the horrific pandemic, people have been itching to scoop up the latest iPhone 12. And I believe even more people will be picking them up come the post-pandemic discretionary spending boom.
People are longing for a sense of normalcy. And in due time, people will head out again, travelling, enjoying themselves, with 5G smartphones in hand. Once the pandemic is over, the real 5G boom, I think, will begin. And today, you’ll have an opportunity to punch your ticket to the boom at a discount with battered telecom stocks like Verizon.
Rogers: A Canadian 5G leader
Warren Buffett clearly smells opportunity in the space. And I think any Big Three telecom company is a great way to ride on the Oracle of Omaha’s coattails. My favourite Canadian telecom bet at today’s levels would have to be Roger Communications (TSX:RCI.B)(NYSE:RCI), a telecom titan with a media arm. Shares of Rogers are currently down over 25% from their all-time highs, with a rich 3.6% dividend yield.
Now, Rogers doesn’t have the most bountiful yield in the space. It’s the smallest of the major Big Four wireless carriers. That said, what Rogers lacks in the size of its yield, it more than makes up for in the value department and growth potential in the 5G arena.
The company recently clocked in an underwhelming fourth-quarter earnings report that caused shares to remain under pressure. The company has felt the full impact of the COVID-19 pandemic, with revenues plunging 7% year over year on both the wireless and media segments. Many smart people out there, including fellow Fool contributor Andrew Button, view Rogers as the 5G leader in Canada.
“According to Rogers’s website, customers on its Infinite plan can currently access 5G in most of its 150 cities and towns. If that’s true, then Rogers has wider 5G availability than any other Canadian carrier.” wrote Button in his prior piece.
While the 5G lead could change at any time, I’d argue that at these depressed valuations, Rogers represents one of the cheaper ways to punch your ticket to the 5G boom.
