NEW YORK (TheStreet) -- Searching for high dividends? Head back to basics and invest in a sector that has been known for its high yield: telecommunications companies.

Telecom and utilities are the two sectors that have traditionally paid the most, the average telecom paying a 4.8% yield and utilities paying on average about 3.5%.

These are the best telecom stocks to buy that also have the highest dividend yields, according to TheStreet Ratings.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on July 15, 2015 closing prices.

BCE Chart BCE data by YCharts

5. BCE Inc. (BCE - Get Report)
Annual Dividend Yield: 5.05%
Market Cap: $35.7 billion
Rating: Buy, B-
Year-to-date return: -7.7%

BCE Inc., a telecommunications and media company, provides wireless, wireline, Internet, and television (TV) services to residential, business, and wholesale customers in Canada. The company operates through Bell Wireless, Bell Wireline, and Bell Media segments.

TheStreet said: "We rate BCE INC (BCE) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BCE's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 48.55% is the gross profit margin for BCE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 10.87% is above that of the industry average.
  • Net operating cash flow has slightly increased to $1,045.00 million or 6.41% when compared to the same quarter last year. In addition, BCE INC has also modestly surpassed the industry average cash flow growth rate of -0.65%.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, BCE INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • BCE INC's earnings per share declined by 20.3% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BCE INC increased its bottom line by earning $2.97 versus $2.54 in the prior year.

 

 

 

 

CTL Chart CTL data by YCharts

4. CenturyLink Inc. (CTL - Get Report)
Annual Dividend Yield: 7.32%
Market Cap: $16.7 billion
Rating: Buy, B-
Year-to-date return: -25%

CenturyLink, Inc. provides various communications services to residential, business, governmental, and wholesale customers in the United States. It operates through two segments, Business and Consumer.

TheStreet said: "We rate CENTURYLINK INC (CTL) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CENTURYLINK INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CENTURYLINK INC turned its bottom line around by earning $1.35 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($2.56 versus $1.35).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for CENTURYLINK INC is rather high; currently it is at 57.13%. Regardless of CTL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.31% trails the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CENTURYLINK INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Even though the current debt-to-equity ratio is 1.39, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Despite the fact that CTL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.59 is low and demonstrates weak liquidity.

 

TEO Chart TEO data by YCharts

3. Telecom Argentina S.A. (TEO - Get Report)
Annual Dividend Yield: 7.83%
Market Cap: $2.6 billion
Rating: Buy, B
Year-to-date return: -3.4%

Telecom Argentina S.A. provides fixed-line telecommunications and other telephone-related services to residential customers, businesses, and governmental agencies in Argentina and internationally.

TheStreet said: "We rate TELECOM ARGENTINA STET-FRNCE (TEO) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, expanding profit margins, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TEO's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 7.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 41.94% is the gross profit margin for TELECOM ARGENTINA STET-FRNCE which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.57% is above that of the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Diversified Telecommunication Services industry average. The net income increased by 4.1% when compared to the same quarter one year prior, going from $112.01 million to $116.66 million.
  • TEO's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.70 is somewhat weak and could be cause for future problems.

 

 

 

VZ Chart VZ data by YCharts

2. Verizon Communications Inc. (VZ - Get Report)
Annual Dividend Yield: 4.75%
Market Cap: $193.4 billion
Rating: Buy, B+
Year-to-date return: 1.2%

Verizon Communications Inc., through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide.

TheStreet said: "We rate VERIZON COMMUNICATIONS INC (VZ) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • VZ's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 3.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Diversified Telecommunication Services industry average. The net income increased by 6.9% when compared to the same quarter one year prior, going from $3,947.00 million to $4,219.00 million.
  • Net operating cash flow has increased to $10,169.00 million or 42.44% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.65%.
  • The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 62.18%. Regardless of VZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VZ's net profit margin of 13.19% compares favorably to the industry average.
  • VERIZON COMMUNICATIONS INC's earnings per share declined by 11.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, VERIZON COMMUNICATIONS INC reported lower earnings of $2.51 versus $4.00 in the prior year. This year, the market expects an improvement in earnings ($3.85 versus $2.51).

 

 

 

T Chart T data by YCharts

1. AT&T Inc. (T - Get Report)
Annual Dividend Yield: 5.46%
Market Cap: $180.3 billion
Rating: Buy, A-
Year-to-date return: 3.4%

AT&T Inc. provides telecommunications services in the United States and internationally. The company operates through two segments, Wireless and Wireline.

TheStreet said: "We rate AT&T INC (T) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • T's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for AT&T INC is rather high; currently it is at 55.24%. Regardless of T's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.82% trails the industry average.
  • AT&T INC's earnings per share declined by 12.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.19 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.52 versus $1.19).
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Diversified Telecommunication Services industry average. The net income has decreased by 12.4% when compared to the same quarter one year ago, dropping from $3,652.00 million to $3,200.00 million.
  • Even though the current debt-to-equity ratio is 1.12, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.48 is very low and demonstrates very weak liquidity.