AT&T Inc. (T), America Movil SAB de CV (ADR) (AMX): Which Telecom Business Should You Invest In?

Verizon Communications Inc. (NYSE:VZ) is growing its wireless segment

Another big peer, Verizon Communications Inc. (NYSE:VZ), also has a much lower valuation than AT&T. It is trading at $50 per share, with the total market cap of $143.17 billion. The market values Verizon Communications Inc. (NYSE:VZ) at only 5.9 times its trailing EBITDA. Income investors might also like Verizon Communications Inc. (NYSE:VZ)’s nice dividend yield at 4.10%; however, the company pays its shareholders dividends nearly four times higher than its earnings. The greatest asset of Verizon Communications Inc. (NYSE:VZ) is its wireless business, which enjoyed consistent growth in revenue and cash flow.

In the second quarter, the service revenue came in at $17.1 billion, an 8.3% year-over-year growth compared to its revenue of $15.8 billion in the second quarter last year. Its EBITDA experienced a 10.2% year-over-year increase, to $8.5 billion. The business is considered a cash cow, generating as much as $9.5 billion in the first half 2013, much higher than a $7.8 billion free cash flow in first half 2012. For the full year, Verizon Communications Inc. (NYSE:VZ) expects to raise its capital spending to $16.4 billion-$16.6 billion from the previous guidance of $16.2 billion due to higher demand for wireless data consumption and advanced wireless service spectrum deployment.

My Foolish take

AT&T does not seem to be a good pick at its current price due to its high valuation and the unsustainably high payout ratio. Personally, I like America Movil SAB de CV (ADR) (NYSE:AMX) the most with its global leading position in emerging markets including Mexico, Colombia, Ecuador and Brazil. Moreover, it has a low valuation and quite a conservative payout ratio. Instead of paying out in dividends, Carlos Slim uses the cash to repurchase its shares right after the significant drop, and for acquisitions to further expand America Movil’s business. Looking forward, America Movil will deliver sweet returns for its shareholders in the long run.

The article Which Telecom Business Should You Invest In? originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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