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Wall Street's Favorite Industry and the Four Stocks It's Buying

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CenturyLink (CTL - Get Report) is soon to be the nation's third-largest phone company after its acquisition of Embarq in 2009, Qwest in 2010 and the recent takeover of information-technology services provider Savvis.

It has seen institutional buyers outnumber sellers of its stock this year by well more than double, according to Bloomberg.

But apparently retail investors aren't part of its investor base, as CenturyLink's shares are getting hammered, losing 22.5% this year and 8.6% over the past 12 months.

So why the big institutional investor interest? CenturyLink's gigantic cash flows, which allows it to offer an 8.63% projected dividend yield while at the same time it's funding those three big acquisitions.

Currently trading at $33.71 per share, it has a market value of $20.8 billion.

Analysts give its shares 12 "strong buy" ratings, one "moderate buy," and five "holds," according to theStreet Ratings.

Windstream (WIN) was formed in July 2006 in the merger of Alltel's fixed-line business and Valor Communications. The firm serves about 2.9 million phone lines, 1.9 million long-distance phone customers, and 1 million high-speed Internet customers. It has operations in 16 states, primarily in the Southeast and southern Midwest.

It's also aggressive in making acquisitions, as it recently closed D&E Communications and has announced plans to acquire two relatively small telecommunications firms, NuVox, which serves the Southeast, and Lexcom, a regional services provider based in Aurora, Ill.

Windstream has a projected dividend yield of 8.43% on its shares, which are currently trading at $11.82.

"The market is paying a premium for dividend yield over other forms of cash deployment, including buybacks and business reinvestment," said Bank of America Merrill Lynch analysts in a research note on Windstar after giving it a "buy" rating.

Nevertheless, the shares are down 9% this year, bringing the market value to $6 billion. Its shares are up 2% over the past 12 months.

Analysts give it five "strong buy" ratings, one "moderate buy," and nine "holds," according TheStreet Ratings.

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>>To see these stocks in action, visit the 4 Telecom Services Stocks With More Buying Than Selling portfolio on Stockpickr.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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T $38.92 0.45%
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