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 Ubiquiti Inc. (NYSE:UI) 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).
An overhead view of a modern networking technology suite in a data center.
Ubiquiti Inc. (NYSE:UI)
Number of Hedge Fund Holders: 18
Ubiquiti Inc. (NYSE:UI) is an American tech company that manufactures and sells wireless data communication and wired products for businesses and homes. The company faced shortages during the pandemic and responded by taking on variable-rate debt after the supply constraints of 2021 and 2022 to purchase more inventory. However, as interest rates increased in 2022, its interest expenses rose significantly. This strategy may have been flawed, as revenue growth slowed, and the company has had to write off some inventory in recent quarters.
That said, Ubiquiti Inc. (NYSE:UI) is generating strong returns this year surging by over 142% since the start of 2024. The company also reported solid earnings in fiscal Q1 2025. During the quarter, its revenues totaled $550.3 million, reflecting an 8.5% increase from the previous quarter and an 18.8% rise compared to the same period last year. The revenue growth from the prior quarter was primarily driven by higher earnings from both the Enterprise Technology platform and the Service Provider Technology platform. The company is also recognized for its significant investment in research and development (R&D), aiming to drive continuous innovation. In the most recent quarter, its R&D expenses amounted to $38 million.
Bonsai Partners also appreciated Ubiquiti Inc. (NYSE:UI) in its Q2 2024 investor letter. Here is what the firm has to say:
“Ubiquiti Inc. (NYSE:UI) (see our write-up below) also built its business model on top of operational float. Like Costco, Ubiquiti’s products are outliers in terms of the attributes its customers care most about, and as a result, Ubiquiti’s customers and partners defray many of the company’s operating costs, resulting in industry-leading returns on capital.
“Operational float” is valuable because it does not look like “time-based float” yet offers similar benefits. Because this concept is not yet widely recognized, investors retain more value when they identify it. We intend to exploit this idea as long as it remains outside consensus thinking.
You’ve likely noticed by now that we’re fascinated by things that don’t behave as expected. Following our curiosity has been an excellent filter for where we spend our time because we either learn something new or get lucky and stumble upon a new investment idea.
As far as businesses go, Ubiquiti presented itself as a complex web of contradictions. However, as we peeled back the onion, we learned that its contradictions were the source of its competitive advantage. Allow me to share a few of these puzzle pieces:..” (Click here to read the full text)
Ubiquiti Inc. (NYSE:UI) initiated its dividend policy in 2018 and has paid regular dividends to shareholders since then. Currently, it offers a quarterly dividend of $0.60 per share and has a dividend yield of 0.72%, as of December 19.
As of the close of Q3 2024, 18 hedge funds in Insider Monkey’s database held stakes in Ubiquiti Inc. (NYSE:UI), compared with 19 in the preceding quarter. The consolidated value of these stakes is nearly $164 million.
Overall UI ranks 9th on our list of the best telecom dividend stocks to buy for 2024. While we acknowledge the potential of UI 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 UI 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.
