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Discussion Starter #1
Curious what anyone's opinion is on Verizon (VZ)?
I am looking to add a telecom stock to my portfolio for long term, something with a nice dividend I can feel confident in.
Thoughts, fears, concerns, recommendations?
 

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Curious what anyone's opinion is on Verizon (VZ)?
I am looking to add a telecom stock to my portfolio for long term, something with a nice dividend I can feel confident in.
Thoughts, fears, concerns, recommendations?
The P/E=43.57 which is a little pricy. If you exclude their bad quarter as an anomaly its still ~25x. Their dividend is quite good but about 90% of earnings. I would go domestic personally; T,RCI and BCI are all better IMO.
 

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somewhat to my surprise, when i opened a brand-new report from ARC (accountability research corporation) on verizon, they were recommending Buy. They like the vodafone connection & the wireless potential.

i like ARC. It's a forensic analysis service. No investment investment banking, no broker sales. It sells its research, pure & simple.

even so i remain somewhat doubtful about vz. I already hold vz in rrsp, plus also have some cash to invest in rrsp, so could buy more. However the thought of buying more vz is not giving me warm fuzzy ringtones. I'm not hanging up, just putting the telco on hold. It's more of a sector thing. Telcos are looking peakish ...
 

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humble: if you feel telcos are toppish, perhaps you could sell a call on it. This could be a long-distance call, which tends to bring in more revenue. Once your minutes expire, perhaps you can reload and do it again. Long-distance calls: good for making money on telcos?
 

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humble: if you feel telcos are toppish, perhaps you could sell a call on it. This could be a long-distance call, which tends to bring in more revenue. Once your minutes expire, perhaps you can reload and do it again. Long-distance calls: good for making money on telcos?


hi argo i have never held a telco without short calls connected.

my vz are wired to go at 40. Same thing for my bce. I had iyz but options grew impossible so i was recently able to sell at a good price. I used to have telus but they dialed that line a long time ago. It was one of my very few assignments.

last, i'm embarassed to say, i have tef in the rrsp, ouch. That one has short-circuited. I bravely keep on selling the calls olé but if i put the device to my ear i'd be electrocuted.
 

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Telus is one of my two or three favourite stocks, just got their shareholder package yesterday. Interesting to read through it. Stockwell Day has only a few more voting shares than I do, but makes a cool $100,000 sitting on the board. I wouldn't sell long-distance calls on it, but hope that customers keep making them so that we can afford to pay Stockwell Day for his participation in quarterly meetings.
 

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1. i'm embarassed to say, i have tef in the rrsp, ouch.
2. I bravely keep on selling the calls olé..
3. if i put the device to my ear i'd be electrocuted.
1. Gosh, disappointed to hear that you're not perfect! However, I'm proud to say that I sold it in 2011! Waiting for a div. cut perhaps to buy it back. There is a lot I like about the stock, such as its presence in the huge Spanish-speaking part of the world [bet you many people don't know the millions of people involved!]. I should say Portuguese as well not to leave Brazil out of L.America.

2. Bravo on the calls selling!

3. :chuncky:

Might visit España this Summer!
 

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madre de dios i should get out my long list of imperfect losers ...

having a mess of tef in the pieplate illustrates 2 downsides:

1) it's difficult to research foreign stocks so stupid little crumbs like me should not try it;

2) the negative about stocks burdened with option positions is that investor cannot up & sell the stock on a whim. It is like moving house with 3 kids in school compared to moving when one is a student.

no, investor must first (nearly always, but 100% always in registered accounts) buy back the option so he has no naked option liability. Only after that can he sell the stock.

the practical result is that short call artists tend to let stock positions run on far too long.

of course, over ultra-long periods of time this is a good thing, provided that investor has set himself up with hi quality stocks to begin with. Because ultra-long-term, stock markets mostly do rise. Over the course of half an investor lifetime, say.
 

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Instead of Verizon which owns 55% Verizon wireless and Verizon landlines, why not buy Vodafone instead.

You can buy an ADR from the US at a cheap price. It has a good dividend somewhere around 5% and pays twice a year. You will not get charged any dividend withholding tax so this is a good one for your TFSA. It owns 45% of Verizon wireless plus has major international exposure throughout UK, Europe and even some emerging markets. They have a low PE and lots of cashflow. While most of the Euro telcos have been trending down (TEF for example which I also hold) VOD is still holding up well.

If you want to bottom fish, I don't think TEF can get get beat up much more. I think it is trading around a PE of 4 and that is not phoney baloney earnings and they have a ton of FCF to comfortably cover that humongous dividend. It is getting beat up because they have a lot of debt, they've been trying to restructure the old part of their business (boring telco stuff in Spain) but this has cost them because of labor rules in Spain and Spain has been under a lot of heat lately with austerity, unemployment and rising bond yields. However, they have a lot of growth ongoing in emerging markets and get more than 70% of their revenue outside of Spain. If you have a strong stomach, this should turn around in the next couple of years and you'll collect a big dividend while you wait. I've been averaging down on this one and chose to sell some puts which I may get assigned for an all-in cost of about $13.50 which is a major bargain for this stock. If I don't get assigned I collect $150 per contract so it's a pretty good deal.

Anyhow, I still think most people are better off avoiding the American telcos. Apple is taking them to the shed down there. I'd stick with Canada, some of the Europeans or maybe even something like TLK in Indonesia which is a fast growing market of 127M people.
 

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Discussion Starter #12
Thanks Edmonton, thats some great information. Not sure if I have the stomach for TEF though, that thing has been beat to hell, and looks risky as. How long do you reckon they will keep there dividend that high?
BTW what is an ADR, I tried looking up the symbol but I dont think thats the one you were talking about.
Cheers
 

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ADR = American Depository Receipt

My understanding is this is done for some big non-US listed stocks. A bank in the US is a designated buyer of shares of the underlying company. They then sell a form of virtual share listed on a US stock exchange whose price will move in ratio to the underlying share. The holders will get the appropriate ratio of dividends in USD. The foreign company will withhold the appropriate amount of withholding taxes depending on the agreement between that country and the USA.
 

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Instead of Verizon which owns 55% Verizon wireless and Verizon landlines, why not buy Vodafone instead ... It has a good dividend somewhere around 5% and pays twice a year. You will not get charged any dividend withholding tax so this is a good one for your TFSA.
withholdings on foreign stock ADRs are indeed tricky ... i might be wrong on this but it's my understanding that standard US 15% withholding tax will apply to any VOD dividend paid to a non-registered account or to any registered account other than an rrsp.

i get it that the UK does not charge withholding on VOD dividends paid to the creator/manager of the US ADRs. But my understanding is that nothing prevents the US from extracting its 15% non-resident tax on dividends paid out from the ADRs to canadians, with rrsps being the sole exception because they are covered by the canada-US tax convention.
 

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withholdings on foreign stock ADRs are indeed tricky ... i might be wrong on this but it's my understanding that standard US 15% withholding tax will apply to any VOD dividend paid to a non-registered account or to any registered account other than an rrsp.

i get it that the UK does not charge withholding on VOD dividends paid to the creator/manager of the US ADRs. But my understanding is that nothing prevents the US from extracting its 15% non-resident tax on dividends paid out from the ADRs to canadians, with rrsps being the sole exception because they are covered by the canada-US tax convention.
HP, I've heard different stories about this question. Most seem to say that you will not be charged a withholding tax but I have only held VOD in my RRSP so that is not a good test case and withholding taxes were not held. I've heard the same thing would happen with TFSA, that is no withholding taxes but I've never held a UK company in there to test it out.
 

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I've been stalking TEF and FTE for a while now.

In regards to TEF, until Spain can get their nonsense figured out I think I'm going to wait. Right now the politicians seem intent on scuttling the country. For FTE I'm not sure why their so obsessed with not cutting the dividend; they've basically been burning through all their retained earnings in place of debt.
 

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Sharbit, it depends on your investing preferences and your risk tolerance.

TEF is a very good company that is generating tons of FCF with a P/E < 3. They can comfortably cover their dividend. They are a leader in most countries where they operate from the US to Spain to Latin America.

So if you're mostly worried about the country rather than the company Buffet would tell you to ignore all the macro and political stuff and just focus on the company itself. Sir John Templeton would tell you to be greedy when others are fearful right about now. I think TEF is ridiculously cheap and priced this cheap mostly due to macro concerns and this is a great time to buy. I sold a put with a $15 strike and will probably get assigned in the end but that is okay. I'll get TEF at a price of 13.50 per share and I'm content to hold this one for awhile. I wouldn't be surprised if it doubled in 3 years and then I get that 13% dividend on top of it all.

If you want the safer play buy VOD. If you want something even safer buy AT&T. If you want something even safer buy Telus.
 

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HP, I've heard different stories about this question. Most seem to say that you will not be charged a withholding tax but I have only held VOD in my RRSP so that is not a good test case and withholding taxes were not held. I've heard the same thing would happen with TFSA, that is no withholding taxes but I've never held a UK company in there to test it out.

edmonton it appears you are right, there is no withholding tax either british or US on vodaphone in any type of account, whether registered or non-registered.

it was a comedy to check out what the broker is actually doing with VOD & other british ADRs. Not what they are saying, but what they are doing.

the representative looked up recent vodaphone dividends in non-registered accounts. We both knew there would be no british withholding tax on these ADR divs. He was expecting to see a US tax of 15% withheld from dividends, though. I was expecting the same.

nothing was withheld. Astonishment !!! he called in his team manager. More astonishment !!!!! no US withholding to be seen in VOD.

try british-american tobacco, i asked, the ADR symbol is BTI.

more astonishment !!!!!!! no withholding in tobacco either.

what about royal bank of scotland.

!!!!!!!!!! no withholding.

well. There's a pattern here. Publicly-traded british companies with US ADRs have no british or US withholding taxes on dividends in any type of canadian account.

i for one find it hard to understand why washington would offer such blinding generosity to foreign taxpayers. After all, the ADRs trade in the US, right under the IRS nose. ADRs are usually bundled foreign stocks, so they are not exactly the same security as the original shares, in this case vodaphone trading on london. It seems to me that washington should be able to claim an ADR as a US security & to collect the same 15% it would collect from equivalent US companies such as verizon or AT&T. However, washington is not collecting.

did anyone ever hear of the IRS not being greedy. But with respect to the handful of ADRs that slip through the eye of the needle - the underlying stocks belong to countries that don't withhold taxes on dividends - the IRS is not greedy.

the implications for tfsas are significant. This handful of US dollar ADRs with no withholding taxes are an opportunity to diversify outside canada in tfsa accounts with no foreign tax consequences.
 

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Very interesting findings HP. Does this vary from broker to broker? My guess is not but I don't like to guess. My thought is great news but for how long? If the IRS gets greedy and closes this door what will happen to the price of ADRs? Is there enough Canadian volume to affect the price? I assume most would just sell//transfer from TFSA and buy/transfer into the RRSP room permitting. Any thoughts?
 

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london it is indeed a fruitful & interesting issue. Unfortunately it does require a fair amount of intense research.

ottomh i think the IRS is unlikely to change (phew). I am guessing, as best i can guess, that international taxation lawyers helped form the IRS decisions on US withholding in ADRs long ago & these won't change.

as for the brokers, it's going to be hugely difficult to answer your question.

it was already quite rare that the discount broker to whom i turned would be willing or even able to research through their copious data bases in order to turn up the answers that he gave me. It was not a simple search for him. He had to cross-reference each bit of data.

in other words, i carefully chose the representative whom i asked. I have known him for a number of years. He's one of the best. He did me a special favour.

now the question in my mind at this moment goes like this:

which other countries in addition to Great Britain have zero withholding tax ?

i'm interested because i believe that ADRs from corporations HQ'd in all those countries are also going to have zero withholding tax in any kind of canadian account, whether registered or unregistered.

here's one more tempting piece of info. Later, i asked another representative (equally excellent & painstaking) if he could please check out an ADR for a corporation whose host country does have a withholding tax. The question was: In non-registered accounts, is a 15% US withholding tax levied in addition to the withholding tax charged by the country of origin. The example i chose was our favourite, telefonica.

he located a recent telefonica dividend payment in a client's margin account. There was a 19% spanish withholding tax, which is something we all know about. There was a small fee, which most ADRs are charging these days. But there was no 15% US withholding on top of that ...

eureka !
 
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