In this low interest rate environment, buying a bond or a CD is an insult. Instead, what would you think about an investment paying 6.5-6.8%, raises the amount they pay you every year, and has a built-in capital gain potential of 55-60%? Oh, and there is more. This investment is a virtual monopoly.

There are not many investments in the world that can be categorized as “no brainers” without sounding arrogant. If the stock market has taught me anything over the past 22 years, it’s not to be arrogant.  This being said, these two investments are about as close to being a sure thing as anything I have ever seen.

As an investor, I loved to buy beaten down monopolies. In my opinion, these two stocks are once again monopolies.

Back in 1974, the FCC said that AT&T, being the only phone company in the U.S., was a monopoly. By 1984, AT&T was broken into seven regional phone companies (the Baby Bells), and a much smaller AT&T.

In other words, Humpty Dumpty had a great fall!

Unlike the story of Humpty Dumpty, all the kings CEO’s, and all the kings’ politicians, have allowed AT&T to be put back together again. The Baby Bells have all but disappeared, and now we are left with two companies; Verizon (Bell Atlantic, GTE), and AT&T (SBC, Ameritech, Bell South) (Get my free report, 10 Under-Loved Stocks on Sale Now).


Verizon: Can You Hear Me Now?

The name, Verizon Communications (VZ) became official after the merger of Bell Atlantic and GTE. Under the watchful eye of the company’s visionary leader, CEO Ivan Seidenberg, Verizon aggressively expanded into wireless becoming the popular choice of over 100 million customers.

The company made other strategic moves by acquiring MCI and Alltel, and forming alliances with Vodafone’s AirTouch.

In addition to the wire line, and wireless cell phone business, the company has expanded its reach into DSL internet, mobile internet, and cable TV. This allows the company to not only compete with its chief rival (AT&T), but cable networks as well. (Here is another under-loved stock paying a nice dividend).

When you look at the numbers, the company is even more impressive.

Verizon has over 91 million wireless customers, and picked up 13 million of those subscribers after the Alltel merger closed in January. The just company added more than 2.2 million new net subscribers in the fourth quarter of 2009 by taking market share from its competitors.

Talking about a cash cow, the company generates on average $52 per user, which translates into a quarterly cash generation of $4.732 billion per month. With this cash, Verizon increased its dividend by 3%, bringing the current dividend per share to $1.90 per share, or 6.51%.

Despite a terrible recession, the company has managed to grow their dividend. In fact, since the economy began to weaken in 2007, Verizon has managed to raise their dividend from $1.65 in 2007, to $1.90, an increase of 15.1%. I believe investors buying the stock at current levels will see gains of 50-60% in the years ahead, and receive enough dividend increases to give current buyers a yield of 7-8%. (10 more stocks on the move).



Together with Verizon, AT&T(T) has a monopoly on the wireless and wire-line telecommunications business. When SBC Communications (Southwestern Bell) bought AT&T in 2005, the name of the company was officially changed to AT&T.

The “new” AT&T is a combination of Southwestern Bell (SBC), Bell South, Pacific Telesis, Ameritech, and Southern New England Telecommunications.

See, Humpty Dumpty can be put back together again!

Its communications footprint is very strong as the company has 85.1 million wireless users (+10.5% y/o/y) that paid on average $61 per month, as well as 49.4 million wire line users in 22 states. The company also offers DSL internet, mobile internet, and cable TV. (This high-tech, high-yield stock is worth a look).

The big news of late has been AT&T’s joint venture with Apple’s iPhone, and recently that the company will provide wireless data for the iPad.

Investors seem to be falling over themselves buying stocks like Apple and Google for their new phones. This reminds me of “The Gold Rush” of 1848. The people who made money during the gold rush were not the ones panning for gold. The ones that made the big money were the ones selling the picks and the shovels.

In my opinion, Verizon and AT&T are the ones selling the picks and the shovels during this latest communications craze. They are minting money monthly by charging fees for all the latest and greatest gadgets and applications being invested by cell phone manufacturers.

So, for investors looking for a rising income stream, big capital gain potential, and a high margin of safety, my money is on Verizon and AT&T. (10 Under-Loved Stocks on Sale Now).



Share This