How European Telecoms Pulled Off This Surprising Surge
I don't know if you noticed, but Tuesday was a pretty brutal day for our stock markets. The Dow Jones Industrial Index (INDEX: ^DJI) fell as much as 0.8% as investors were spooked by bad news out of China and Detroit. European indexes crashed even harder.
But one surprising sector bucked the trend. Shares of France Telecom (NYS: FTE) , Telecom Italia (NYS: TI) , and Vodafone (NYS: VOD) notched gains of more than 1.7% each, and never you mind that they're all European.
That surge followed France Telecom's presentation of "10 commitments" the company is making to digital communications growth in the coming years. The European Union recently released a bushel of bandwidth to wireless operators, including the three large telecoms mentioned above, and France Telecom is spearheading a charge to make the most of the new radio riches.
Among other forward-looking statements, CEO Stephane Richard promised to sell more NFC-enabled handsets to enable frictionless retail transactions, said he'd invest more in cloud computing services, and planned to organize digital health records services for consumers and hospitals. 4G LTE will be a trans-European network standard by 2015, at least in areas served by France Telecom's Orange networks. And ultrafast fiber-optic broadband should reach 80% of French businesses by 2020.
None of this will be cheap, and many international telecoms are slashing their dividend policies in order to support large infrastructure investments. Yes, even France Telecom. That hurts in the short term, especially if you're investing in these cash machines only to enjoy their generous payouts. But in the long run, it's smart money management that opens a window to future growth -- and secure dividends decades down the road.
Fellow Fool Anand Chokkavelu recently singled out France Telecom as the blue-chip telecom to buy in March, and I bought shares myself last summer. I'm happy to see the company investing in its future, and even inspiring the competition to do the same. And if you love telecom stocks for their meaty dividend yields, you should also have a look at nine rock-solid dividend stocks that can secure your retirement. This special report is free for a limited time, so get your copy right now.
At the time this article was published Fool contributor Anders Bylund owns shares of France Telecom but holds no other position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of France Telecom and Vodafone Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.
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