The 5 Worst Telecom Stocks in January

The market has jumped out of 2012 on fire. The Dow has shown solid gains of 3.6%, but the real star of the major index world has been the Nasdaq and its 7.7% gain.

As technology's "little brother," you'd expect telecom to be riding the wave of earnings surprises and big gains as well. However, it's been a pretty miserable start to 2012 for America's telecom players.

Let's check in on which telecom companies are struggling the most as the year begins.

5 worst telecom stocks of January


% Price Change




(NYS: S)






Source: S&P Capital IQ. Includes only companies with a primary U.S. listing and market cap greater than $750 million. Performance through Jan. 27.

You can thank Apple for the quarter
The two big shots of the wireless world, AT&T (NYS: T) and Verizon, both sank after earnings reports in large part thanks to the increased cost of subsidizing smartphones (cough, the iPhone). While Sprint hasn't reported yet, that can't be a great omen for the country's No. 3 carrier. Sprint reportedly had to grant Apple some heady concessions to get the iPhone, so the company could be in for a tough few quarters if iPhone activations were as strong as AT&T's and Verizon's numbers suggest.

Big dividends, big losses
Then there's the other end of the telecom spectrum: dividend payers and the dark side of debt. Frontier, a company known pretty much solely for its monster 17.4% (for now) dividend yield, suffered a setback when S&P lowered its credit outlook to negative while maintaining a BB credit rating. Frontier has over $2.1 billion in loans maturing between 2013 and 2015, so any loss of creditworthiness could add a costly level of borrowing costs.

Speaking of debt, Clearwire announced in its earnings that the company was planning on taking on another $300 million to add to its more than $4 billion in current debt. Those funds are supposed to help with the company's LTE rollout. While Clearwire posted stronger-than-expected revenues, concerns about its partnership with Sprint will continue to outweigh operational results in the coming year.

More time to come
While all of these companies saw their share prices fall throughout January, it's still a small time frame in the grand scheme of an investor's timeline. If you're an investor in telecom because of dividends, keep in mind that a stable player like Verizon is still outperforming over the last year even after January's underperformance. Oh, and it has been paying out a stable stream of income the whole time.

That's it for our recap of the telecom space. However, if you're looking for a better stock idea to kick off 2012, we've uncovered one such stock with so much promise we've dubbed it "The Motley Fool's Top Stock for 2012" and created a special free report for investors to uncover this soon-to-be rock star. The report highlights a company that is revolutionizing commerce in Latin America, and you can get instant access to the name of this company. Thousands have already requested the report, which is free today, but it won't be forever, so access it now.

At the time thisarticle was published Eric Bleeker owns shares of no companies listed above. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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