Telecom stocks have had a great start to the year - and they're still quite cheap

By Emily Bary and Philip van Doorn

 Several companies in the S&P 500's communications sector trade at low price-to-earnings valuations, with attractive dividend yields well supported by cash flow 

 This has been an excellent year so far for shareholders of Verizon and AT&T - and both stocks can still be considered deep-value plays based on price-to-earnings ratios, dividend yields and estimated free-cash-flow yields. 

 A pivot toward value stocks has benefited the telecommunications industry this year, with the major players all outperforming the broader market. 

 As the S&P 500 SPX has declined 1.5% so far in 2026, Verizon's stock (VZ) has risen 25.5%, while AT&T (T) is up 15.3% and T-Mobile US (TMUS) has advanced 91%. (All price changes in this article are through Friday and exclude dividends.) 

 Even shares of cable providers Charter Communications (CHTR) and Comcast (CMCSA), once weighed down by competitive concerns over their home-internet businesses, have staged 11.3% and 14% rallies so far this year, respectively, following double-digit declines last year. 

 And yet, save for T-Mobile, the above telecom stocks screen as "deep-value" plays. Verizon and AT&T are among the least expensive stocks in the S&P 500 communications-services sector XX:SP500.50 by forward price-to-earnings ratios. These are prices divided by consensus 12-month earnings-per-share estimates among analysts polled by LSEG. The ratios are weighted by market capitalization for sectors and indexes. 

 Verizon, Charter and Comcast trade at forward P/E valuations that are less than half of the weighted forward P/E ratios of 21.4 for the S&P 500 communications sector and 21.8 for the full S&P 500. AT&T trades slightly higher than those three, at a forward P/E of 12.2. 

 T-Mobile US is more expensive, with a forward P/E of 20.2. However, the company is expected to increase its revenue at a faster pace than rivals AT&T and Verizon, according to consensus estimates. The three dominate the U.S. wireless telecom space, with a 35% market share for T-Mobile, a 34% share for Verizon and a 27% share for AT&T in 2024. These are the most recent market-share figures available from TeleGeography, updated last April. 

 The standout performance of telecommunications stocks dovetails with broader momentum for value plays. The Russell 3000 Value Index XX:RAV has risen 3.3% so far this year, while the Russell 3000 Growth Index XX:RAG has declined 5.5%, according to LSEG. 

 When it comes to the wireless stocks, investors seem to have made peace with competitive dynamics in the industry. Late last year, Wall Street worried that Verizon was talking up growth under new CEO Dan Schulman. The wireless industry had been somewhat counting on Verizon to stay disciplined with its pricing and not lead rivals toward a race to the bottom in pursuit of its own subscriber growth. 

 But after Verizon posted 616,000 net postpaid phone subscribers in the fourth quarter, its largest such haul in since 2019, investors weren't too rattled. 

 On the one hand, "Verizon's ambitions are likely to raise concerns on the future financial risks from elevated industry competition for its competitors," Citi analyst Michael Rollins acknowledged in a February note to clients. Still, he wrote that "a substantial portion of this concern" had been already baked into the prices of wireless stocks. 

 AT&T, meanwhile, continues to reap the rewards of a simplification strategy years in the making. Once maligned for taking on debt to fuel costly media acquisitions, AT&T has since sold off those units and refocused on core telecommunications activities. By investing in fiber connectivity, the company has been able to sell more bundled offerings, something that it says helps with customer retention. 

 AT&T is also continuing to expand its wireless broadband capability. This includes a $23 billion deal to acquire spectrum licenses from EchoStar (SATS), in a deal slated for completion in the middle of 2026. 

 As of the fourth quarter, more than four in 10 AT&T fiber subscribers also used the company's wireless services. 

 T-Mobile has been impressing investors through its greater focus on capital returns. CFO Peter Osvaldik told MarketWatch in February that the company was sitting on a "significant amount of capacity" both to invest in its network and dole out cash to shareholders over the next two years, in the form of dividends and buybacks. 

 The network investments at Verizon, AT&T and T-Mobile have been a source of consternation for cable investors, as all three companies have stepped up their home-internet offerings, either via fiber service or fixed-wireless-access products, which rely on spare mobile capacity. Comcast and Charter have bled broadband subscribers against this more competitive backdrop. 

 Now, the negative sentiment may have bottomed. Charter, for instance, did lose broadband subscribers in the fourth quarter, but fewer than expected and fewer than in the year-before period. And the company actually managed to grow subscribers in video, a business that had been in protracted decline. 

 "Charter is enjoying an astounding turnaround driven by its bundled streaming packages," MoffettNathanson analyst Craig Moffett wrote at the time. 

 Comcast isn't a pure-play telecom provider, as the company also operates studio, theme-park and streaming units. "We are convinced that Comcast's results are bottoming," Wolfe Research's Peter Supino wrote after its fourth-quarter earnings report, though he added that management "continues to avoid acknowledging the failure of its conglomerate structure." In Supino's view, that has led investors to undervalue business segments, including NBCUniversal. 

 Screening the S&P 500 communications sector 

 There are only 20 companies in the S&P 500 communications-services sector, which actually includes two Big Tech names - Alphabet (GOOGL) (GOOG) and Meta Platforms (META). These two make up 38% of the State Street Communication Services Select Sector SPDR ETF XLC, which tracks the sector. Add Netflix (NFLX), and those three companies make up nearly 44% of the XLC portfolio. 

 Below are all 20 companies in the sector, sorted by ascending forward P/E. We have also included dividend yields and forward free-cash-flow yields. 

Company Forward P/E Dividend yield Forward FCF yield FCF “headroom” Charter Communications 5.1 0.00% 15.85% 15.85% Omnicom Group 7.4 3.77% 14.13% 10.36% Comcast 8.4 4.14% 12.59% 8.46% Verizon Communications 10.2 5.54% 9.84% 4.31% Fox (Class A) 10.8 1.03% 8.49% 7.46% Match Group 11.0 2.63% 15.10% 12.47% AT&T 12.2 3.88% 9.09% 5.22% Trade Desk 13.6 0.00% 6.38% 6.38% Walt Disney 14.4 1.48% 6.11% 4.64% Paramount Skydance - Class B 14.9 1.67% -1.27% -2.94% T-Mobile US 20.2 1.84% 7.48% 5.64% Meta Platforms 20.8 0.33% 0.43% 0.10% Electronic Arts 21.1 0.38% 4.51% 4.12% News Corp (Class A) 23.3 0.72% 4.65% 3.93% Alphabet 25.0 0.28% 1.02% 0.74% Take-Two Interactive Software 25.7 0.00% 3.35% 3.35% Netflix 29.9 0.00% 2.78% 2.78% TKO Group Holdings 35.2 1.54% 2.80% 1.26% Live Nation Entertainment 88.1 0.00% 3.66% 3.66% Warner Bros. Discovery - 0.00% 6.37% 6.37% Source: LSEG

 A company's free cash flow (FCF) is its remaining cash flow after capital expenditures. This is money the company can use to fund expansion or acquisitions, pay dividends, buy back shares, or for other corporate purposes. 

 The above forward FCF yields are based on current share prices and consensus FCF-per-share estimates for2026 among analysts polled by LSEG. If we compare the estimated FCF yields with the dividend yields, we can see if there is "headroom" above the dividend. This can indicate a measure of safety for the current dividend payout, as well as generation of excess cash that can be deployed in ways that (hopefully) work out well for shareholders. 

 Charter tops the list with the lowest forward P/E and the highest forward FCF yield. This is an interesting set of numbers for investors willing to take a value dive, even in an industry perceived still to be in decline, because so much cash is being generated. 

 Omnicom (OMC) is next, with not only a low P/E but an attractive dividend yield of 3.77%, very well supported by the expected FCF yield of 14.13%. In case that dividend yield doesn't impress you in a market with 10-year U.S. Treasury notes BX:TMUBMUSD10Y yielding 4.14%, consider that the S&P 500's weighted dividend yield is only 1.16%, according to LSEG, and bonds don't have the capital-growth potential that stocks can have over the long term. 

 Comcast features a dividend yield of 4.14%, also very well supported by expected FCF per share. 

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03-07-26 0730ET

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