This makes them perfect additions to almost any portfolio. But each company has its own key advantages and disadvantages, and which firm you chose is down to your own personal investment preference.
Size is key
BTsmain advantage is the companys size. It would be hard for BT to disappear overnight, as the company is an essential part of the UKs telecommunication infrastructure.
However, there is one thing thats holding the company back BTs debt, specifically the companys pension deficit, is one of the largest in the UK.
BTs pension deficit currently stands at around 7bn. Thetelecoms giant has committed itself to 2bn in scheme funding payments over the next three years. The company has a 16-year deficit reduction plan in place, but cash commitments to the scheme will hold back shareholder returns.
Still, the companys dividend yield of3.2% looks safe for the time being. The payout is covered two-and-a-half times by earnings per share.
Fending off the competition
SKYskey advantage is alsosize. Moreover, the companys purchase of exclusive rights to broadcast sports events, like the 4.2bn deal to broadcast thePremier League for three seasons, will pull customers towards the group.
That being said, Skys dominance is being threatened by low-cost online streaming companies like Netflix. Sky will need to show that it can hold its own against these companies during the next few years.
For the time being, however, Sky seems to be fending off the competition. Revenue has grown by a third since 2010 and sales are expected to expand a further 50% by 2016.
Skys dividend yield currently stands at 3.1% and the payout is covered 1.7 times by earnings per share.
Small and mighty
Unlike Sky and BT,TalktalkTelecom doesnt have the key advantage of size on its side. Luckily, this hasnt hampered the companys ambitions.
According to current forecasts, at the end of this year, Talktalks pre-tax profit will have tripled since 2011. Excluding exceptional costs, Talktalksstatutory profit after tax jumped 157.1% year on year last year to 72m.
Current figures suggest that Talktalks pre-tax profit will jump 59% next year. After that, management believes that the companys sales will settle into a long-term growth rate of 5% per annum.
Talktalkcurrently supports a dividend yield of 3.6% and trades at a forward P/E of 25.9. The payout is set to rise around 10% per annum for the next three years.
KCOMsgreatest strength is the companys cash generation, and most of this cash is returned to investors. At present, the company supports a dividend yield of 5.5%.
Unfortunately, while KCOM is an income champion, the companys growth leaves much to be desired. Revenue has fallen by 13% during the past five years, although pre-tax profit has increased by 49%. KCOM has expanded into the higher-margin telecoms servicesmarket.
Nevertheless, next year analysts believe that KCOMs yield will hit 6.0%. The payout is currently covered one-and-a-half times by earnings per share.
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