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Investing in Telco stocks to pay your phone bills

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Below article is adapted from SGX website and permission was sought to publish it.

According to a year-end BCG report, there are currently almost 7 billion mobile phone subscriptions globally, or one for every person on Earth.

Last year, listed mobile phone providers – Singtel, Starhub and M1 averaged a 10.1% total return and have generated a 1.7% return in the year thus far.

These stocks all distributed dividends last year, which might have helped offset mobile phone subscription plans. For instance, an investment of S$7,320 in Singtel shares last year would have generated enough dividend income to pay the minimum annual fee of Singtel’s Combo 1 plan.

Stock investing

According to Boston Consulting Group (BCG), there are currently almost 7 billion mobile phone subscriptions globally, or one for every person on Earth. The recent report BCG noted several factors are fuelling subscription growth, including greater access, increasingly sophisticated mobile-device functionality, fast-rising device sales, an ever-increasing range of devices and device types, and sharply falling prices. Another factor that was noted included more reliable data connections that enable increasingly data-intensive activities – moreover approximately 60% of the world’s population is covered by 3G connectivity.

Singapore’s three listed mobile providers are Singtel, Starhub and M1. All three stocks paid dividends in 2014, which means that if you had a mobile subscription plan with one of the three companies and owned shares in them, some of your subscription expenses could have been returned to you in the form of dividends.

With the distribution of telecommunications stock income through dividends, a steady stream of income was provided to shareholders last year. Take for instance, SingTel which distributed a 10 cent and 6.8 cent dividend last year. The total dividend amount represented 16.8 cents for the 2014 year, which was the same amount distributed in 2013. The Singtel Combo 1 mobile subscription plan cost a minimum of $27.90 a month, not including tax and other service charges. Based on this current information, the plan would have cost S$334.80 for the past 12 months.

Given each Singtel share paid 16.8 cents for the 2014 year, a total of 1993 Singtel shares would have been needed to generate S$334.80 in dividends last year. Given the minimum board lot size was 1000 shares last year, 2000 shares would have been required. Singtel shares began 2014 at a trading price of S$3.66 and ended 2014 at a trading price of S$3.90. Hence, an investment of S$7,320 in Singtel shares last year would have generated enough dividend income to pay for the minimum fee of Singtel’s the Combo 1 plan.

The purpose of this example is to provide a simple educative example how dividends can be applied by investors. All investors maintain their own unique set circumstances and objectives when it comes to investing hence using dividends to offset expenses may not be a relevant activity.

Singapore Telecommunications
Singapore Telecommunications provides multimedia and infocomm technology (ICT) solutions in Singapore and Australia. It offers facilities management, consultancy, information technology, Internet access, and pay television services; technical, business, and management consultancy services; and distributes telecommunications and data communication products.

Singapore Telecommunications has the highest market capitalization of S$62,817.7 million and the stock generated 2014 total return of 11.3%. On 13 November 2014, the company reported that their revenue for the half-year ended 30 September increased by 0.01% to S$8,457.0 million

Starhub
StarHub provides a range of information, communications, and entertainment services for consumer and corporate markets in Singapore. The company’s personal solutions comprise mobile services, wireless broadband services, and IDD services. Starhub has a market capitalization of S$7,156.5 million and the stock generated a 2014 total return of 1.5%. On 5 November 2014, the company reported that their revenue for the third quarter period ended 30 September increased by 2.3% to S$592.0 million.

M1
M1 provides mobile and fixed communications services in Singapore. It offers a range of voice, data, and value-added services on 4G, 3G/high-speed packet access, and 2G networks; and wireless broadband services. M1 has a market capitalization of S$3,455.2 million and the stock generated a 2014 total return of 17.4%. On 16 October 2014, the company reported that their revenue for the third quarter period ended 30 September increased by 3.5% to S$250.2 million (Click here to view). The stock went ex-dividend on 6 August 2014, distributing S$0.07 per share in dividends. A S$0.119 dividend was declared on Monday, which will go ex-dividend on 17 April.

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