We recently compiled a list of the 10 Best Telecom Dividend Stocks To Buy for 2024. In this article, we are going to take a look at where Motorola Solutions, Inc. (NYSE:MSI) stands against the other telecom dividend stocks.
The telecommunications sector plays a vital role in the United States, attracting considerable interest from investors due to its steady focus on innovation and rapid technological advancements. Beyond offering standard voice and data services, telecom firms drive progress by introducing innovations such as 5G technology, Internet of Things (IoT) solutions, and cloud computing, which support digital transformation across multiple industries. Investor interest in the sector is evident from estimates showing that from 1985 to 2020, wireless network operators invested over $600 billion in capital expenditures, according to a report by the Cellular Telecommunications Industry Association (CTIA). This figure excludes the more than $120 billion paid to the federal government for spectrum rights, which are essential for powering networks and meeting consumer demand for wireless services.
The CTIA report also mentioned that the significant spending on spectrum and infrastructure over the past decade has enabled the wireless industry to provide services to hundreds of millions of consumers across the US. This has resulted in nearly $9.5 trillion in gross output, $5.4 trillion in GDP, and an average of over 3 million jobs annually. In 2020 alone, the industry generated more than $1.3 trillion in gross output, $825 billion in GDP, and supported close to 4.5 million jobs in the U.S. economy.
Also read: Retirement Stock Portfolio: 7 Safe Dividend Stocks To Invest In
As 2025 draws near, the telecommunications industry is evolving rapidly, driven by a mix of challenges and opportunities that will influence its future path. Rapid technological advancements, rising consumer demand for faster and higher-quality internet, and ongoing shifts in the business landscape contribute to the sector’s dynamic nature. Analysts suggested that while predicting the future always carries uncertainties, it is clear that groundbreaking technologies, particularly artificial intelligence, will play a transformative role in the telecommunications industry. Simultaneously, societal factors such as the climate crisis, demographic changes, and geopolitical challenges will compel operators to innovate and adapt at a faster pace to stay competitive. Jelena Trivan, CEO of Mtel, also discussed artificial intelligence during an interview with Bloomberg. Here are some of her comments:
“In telecommunications future, AI will play an important role in the industry transformation. It will enable a more efficient data processing, network optimization, and improvement of the customer experience. Customer support automation, through chatbots and virtual assistants, will reduce waiting time and increase customer experience. Also, AI will help in predicting and resolving network problems before they reach critical level, by which the reliability of the services will be increased. With introduction of modern communication tools, we will provide for personalized offers for the customers, customized to their needs and habits, and our business processes will become even faster and more efficient.”
Telecom stocks have been delivering impressive returns this year, driven by the sector’s significant economic contribution and promising outlook. In 2024, the telecom industry has outperformed the broader market. The Telecom Select Industry Index, which measures the performance of stocks within the market’s Total Market Index in sub-industries such as Alternative Carriers, Communications Equipment, Integrated Telecom Services, and Wireless Telecom Services, has gained over 33% year-to-date, surpassing the market’s 24% return.
Alongside their impressive returns, telecom stocks are recognized for providing reliable dividend income. Janus Henderson’s annual dividend report revealed that these stocks distributed $73.7 billion in dividends in 2023, growing from $73.2 billion in 2022. In this article, we will take a look at some of the best dividend stocks from the telecom sector.
Our Methodology:
For this list, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 and selected stocks that belong to the telecom sector or provide services in the industry and pay dividends to shareholders. From the resultant list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up view of a mission-critical communication device in action.
Motorola Solutions, Inc. (NYSE:MSI)
Number of Hedge Fund Holders: 48
Motorola Solutions, Inc. (NYSE:MSI) ranks seventh on our list of the best telecom dividend stocks. The American technology, communications, and security company plays a pivotal role in the communications industry, focusing on mission-critical communications and analytics. The company provides integrated technologies and services across segments such as LMR, Video Security and Access Control, and Command Center software. Its primary aim is to seamlessly integrate these solutions into unified ecosystems that enhance safety and security. In addition, the company’s ongoing investment in research and development highlights its dedication to improving product interoperability and delivering innovations that cater to a wide range of customers, including those in government and commercial sectors. the stock has surged by nearly 49% in 2024 so far.
Wedgewood Partners made the following comment about MSI in its Q3 2024 investor letter:
“Motorola Solutions, Inc. (NYSE:MSI) was another top contributor to performance as the Company continued its steady execution with +9% year-over-year sales growth and +22% adjusted earnings per share growth. While Motorola’s backlog for products declined, much of it was due to accelerated revenue recognition on strong deliveries for its Land Mobile Radio” (LMR) business – a critical long-term solution for emergency services around the globe. The technology behind LMR is quite simple; however, it is an extremely robust implementation that needs to withstand regular and even mega catastrophes (e.g., hurricanes) in order to guarantee uptime for the emergency services that depend on it for communications. The Company has superlative, unmatched competitive positioning in this core business and should be able to continue to expand value-added service offerings to LMR and drive attractive long-term growth.” (Click here to read the full text)
Motorola Solutions, Inc. (NYSE:MSI) reported strong earnings in the third quarter of 2024. The company posted revenue of $2.79 billion, up over 9.15% from the same period last year. Sales in the Products and Systems Integration segment increased by 11%, while the Software and Services segment saw a 7% rise. Excluding sales to the UK Home Office, growth in the Software and Services segment reached 13%.
In addition, Motorola Solutions, Inc. (NYSE:MSI)’s cash position also remained stable during the quarter. The company’s operating cash flow of $759 million showed growth from $714 million in the prior-year period. Its free cash flow came in at $702 million, up from $649 million in the year-ago quarter. The company also returned $164 million to shareholders through dividends. This strong cash position allowed the company to increase its payouts for 13 consecutive years. Currently, it offers a quarterly dividend of $0.98 per share for a dividend yield of 0.94%, as recorded on December 19.
Insider Monkey’s database of Q3 2024 indicated that 48 hedge funds held stakes in Motorola Solutions, Inc. (NYSE:MSI), growing from 42 in the previous quarter. The total value of these stakes is more than $1.3 billion. Among these hedge funds, Orbis Investment Management was the company’s leading stakeholder in Q3.
Overall MSI ranks 7th on our list of the best telecom dividend stocks to buy for 2024. While we acknowledge the potential of MSI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.