Telecom Stocks: Back on the Rise

Though the group has proved to be less defensive recently, telecom service stocks have begun to recover. S&P thinks some look undervalued

The trailing 12-month relative strength ranking for the S&P 1500 integrated telecommunications services subindustry index improved in the past week and now lies in the middle 40% of all subindustries in the S&P Composite 1500 Index (consisting of the S&P 500, MidCap 400, and SmallCap 600 indices). According to Todd Rosenbluth, S&P Equity Research's telecom services group head, the improvement in relative performance was likely due to the reporting of strong third-quarter cash flows last week that would likely continue to support the group's hefty dividend payments. For the year through Nov. 7, the subindustry, which yields 6.3%, fell 34.4% vs. a 36.5% decline for the S&P 1500 index.

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